A company issues $20 million in new stock.It later uses the cash received to pay off promissory notes.How many different accounts and which account names are affected by these two transactions?
A)3 accounts involved: contributed capital,cash,and notes payable.
B)4 accounts involved: contributed capital,cash,investments,and notes payable.
C)3 accounts involved: cash,contributed capital,and accounts payable.
D)3 accounts involved: contributed capital,investments,and accounts payable.

Question

Quizplus · Accepted Answer

The issuance of new stock affects the contributed capital account and the cash received account. The payment of promissory notes affects the cash account and notes payable account. Therefore, there are a total of three accounts involved: contributed capital, cash, and notes payable. Option B is incorrect because there is no indication of investments being involved in the transactions. Option C is incorrect because accounts payable is not affected by either transaction. Option D is incorrect because there is no indication of investments or accounts payable being involved in the transactions.

A Company Issues $20 Million in New Stock