Elaine Matuszek,the sole stockholder of Matuszek Consulting,started the business by investing $40,000 cash.Identify the general journal entry below that Matuszek Consulting will make to record the transaction.
A) $\begin{array}{|l|r|r|}
\hline \text { Cash } & 40,000 & \
\hline \text { Common Stock } & & 40,000 \
\hline
\end{array}$
B) $\begin{array}{|l|r|r|}
\hline \text { Common Stock } & 40,000 & \
\hline \text { Cash } & & 40,000 \
\hline
\end{array}$
C) $\begin{array}{|l|r|r|}
\hline \text { Investments } & 40,000 & \
\hline \text { Cash } & & 40,000 \
\hline
\end{array}$
D) $\begin{array}{|l|r|r|}
\hline \text { Investments } & 40,000 & \
\hline \text { Common Stock } & & 40,000 \
\hline
\end{array}$
E) $\begin{array}{|l|r|r|}
\hline \text { Cash } & 40,000 & \
\hline \text { Increased Equity } & & 40,000 \
\hline
\end{array}$

Question

Quizplus · Accepted Answer

When a company receives cash from a stockholder (in this case, the sole stockholder Elaine Matuszek) in exchange for common stock, the company increases its cash account (an asset) and increases its common stock account (an equity account) to reflect the issuance of stock. This is accurately represented in option A, where Cash is debited for $40,000, indicating an increase in assets, and Common Stock is credited for $40,000, indicating an increase in stockholders' equity.

Elaine Matuszek,the Sole Stockholder of Matuszek Consulting,started the Business by Investing