Clifford Moore purchased $15,000 of Star Tech stock for cash. Star Tech would
A) increase Assets (Cash) and increase Liabilities (Accounts Payable)
B) increase Assets (Cash) and increase Stockholders' Equity (Capital Stock)
C) Increase Assets (Accounts Receivable) and decrease Liabilities (Accounts Payable)
D) Increase Assets (Cash) and increase Assets (Accounts Receivable)

Question

Quizplus · Accepted Answer

When Clifford Moore purchases $15,000 of stock from Star Tech for cash, it increases the assets of the company (Cash) and increases the stockholders' equity (Capital Stock). This is because the company's cash balance goes up by $15,000, making it an asset, and the sale of the stock to Clifford Moore represents an increase in the company's investment from its shareholders, which is part of the company's stockholders' equity. Therefore, choice B is the correct answer.

Clifford Moore Purchased $15,000 of Star Tech Stock for Cash