A company issues $20 million in new stock. The company later uses this money to acquire a building. How many accounts will be affected by these transactions and which particular account names are most likely to be used to record the effects of these transactions?
A) 3 accounts affected: Contributed Capital, Cash, and Building.
B) 4 accounts affected: Contributed Capital, Cash, Liabilities, and Building.
C) 3 accounts affected: Cash, Property, Plant and Equipment, and Contributed Capital.
D) 3 accounts affected: Contributed Capital, Investments, and Cash.

Question

Quizplus · Accepted Answer

The issuance of new stock will affect Contributed Capital, while the acquisition of the building will affect Cash and Building accounts. Therefore, a total of three accounts will be affected. Liabilities and Investments are not directly related to these transactions, and Property, Plant and Equipment is not usually used to record the purchase of a single building.

A Company Issues $20 Million in New Stock