Cari's Bakery, Inc., began operations in October 2017. The owner contributed cash of $18,000 and a delivery truck with fair value of $24,000 to the company.
Which of the following describes how these transactions would affect the company's equity accounts?
A) Increase contributed capital by $42,000
B) Increase earned capital by $42,000
C) Increase contributed capital by $18,000 and earned capital by $24,000
D) Increase earned capital by $18,000 and contributed capital by $24,000
E) None of the above

Question

Quizplus · Accepted Answer

The owner's contribution of cash and a delivery truck (totaling $42,000 in value) to the company increases the company's contributed capital by $42,000. Earned capital refers to profits earned from the company's operations, which is not the case here.