Question

A company issues $20 million in new stock. The company later uses this money to acquire...

A company issues $20 million in new stock. The company later uses this money to acquire a building. What is the effect of these two transactions on the company's accounts?

Multiple Choice

  • Cash decreases, Buildings increases, and Common Stock decreases.

  • Buildings increases and Common Stock increases.

  • Buildings increases and Common Stock decreases.

  • Cash increases, Buildings increases, and Common Stock increases.

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Answer #1

at the time of issue of stock, company will get cash. so cash account will increase and same time common stock also will increase.

at the time of purchase of building, cash account will decrease and same time building will increase.

So, final result will be: Cash account will not any final impact. but common stock and building will increase.

So, answer will be: B. Buildings increases and Common Stock increases.

You can reach me over comment box, if you have any doubts. please rate this answer

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