On February 2,Year 1,Farmer Corporation issued 9,000 shares of no-par stock for $17 per share.Within two hours of the issue,the stock's price jumped on the New York Stock Exchange to $21 per share.Which of the following answers describes the effect of the February 2 transaction on the elements of the financial statements?

Question

On February 2,Year 1,Farmer Corporation issued 9,000 shares of no-par stock for $17 per share.Within two hours of the issue,the stock's price jumped on the New York Stock Exchange to $21 per share.Which of the following answers describes the effect of the February 2 transaction on the elements of the financial statements?
On February 2,Year 1,Farmer Corporation issued 9,000 shares of no-par stock for $17 per share.Within two hours of the issue,the stock's price jumped on the New York Stock Exchange to $21 per share.Which of the following answers describes the effect of the February 2 transaction on the elements of the financial statements? A) Option A B) Option B C) Option C D) Option D

Quizplus · Accepted Answer

Assets (cash)and stockholders' equity (common stock)increase by $153,000 (or 9,000 shares × $17 per share).The cash inflow of $153,000 is reported in the financing activities section of the statement of cash flows.The price an investor must pay to purchase a share of stock is the market value.Published financial statements report historical information,in this case,the company's paid-in capital is recorded at the issue price of $17 per share.In other words,the increase in market price following the issuance does not affect the elements of the company's financial statements.

On February 2,Year 1,Farmer Corporation Issued 9,000 Shares of No-Par