Question

Whena stockholder contributes cash to a corporation in exchange for stock,

a. assets and? stockholders' equity are increased
b. liabilities and? stockholders' equity are increased
c. one asset is increased and another asset is decreased
d. assets and liabilities are increased

Answer 1

A company's assets and stockholders' equity are increased when a stockholder contributes cash to a corporation in exchange for stock. In this situation, a stockholder contributes cash in order to get a portion of the corporation's ownership. The corporation's ownership value is stated in the stockholder's equity section of a financial statement. Cash contributed by the investor becomes the company's asset. Thus, the sentence above is the most suitable answer.