Question

Which of the following increase stockholders' equity:

Select one:

a. None of the above

b. Net loss

c. Paid accounts payable

d. Paid a dividend

e. Issuance of common stock

Answer 1

Answer:

Correct option is e. Issuance of common stock.

Explanation:

Issuance of common stock increase stock holder equity. As per Account equation it's increase both Asset and shareholders equity.

Journal entries for issuance of stock:

Cash Account ..... Debit

Common stock .... Credit

Note:

Net loss and payment of dividend , decrease the retained earnings and overall decrease the stockholder equity.

Cash paid to Account payable doesn't impact to shareholders equity.