Question

Which of the following shows how acquiring cash from the issue of common stock will affect a company’s financial statements? Balance sheet Income Statement Statement ofCash Flows Assets = Liabilities + Equity Rev. − Exp. = Net Inc.A. + = NA + + NA − NA = NA NAB. + = NA + + NA − NA = NA + IAC. + = NA + + NA − NA = NA + FAD. + = NA + + + − NA = + + FA

Answer 1

Answer: C. + = NA + + NA − NA = NA + FA

Explanation:

If stock is issued for cash then the cash raised will go to the Cash account thereby increasing the Cash account which is an asset account.

This transaction does not have any effect on liabilities, revenue, expenses or net income as it was not money derived from the company's operations.

It will increase Equity in the company because shares represent an ownership interest.

In the Statement of Cashflows it will be recorded as a Financing activity as these are the activities that relate to the raising of capital for the company.

Answer 2

Answer:

c

Explanation: