The equity accounts of Bio-Tech Company is as follows: Suppose the firm sells 2,000,000 new (additional) shares at a price of $20 per share. What is the new value of Common Shares account?

Question

The equity accounts of Bio-Tech Company is as follows:  Suppose the firm sells 2,000,000 new (additional) shares at a price of $20 per share. What is the new value of Common Shares account?

Quizplus · Accepted Answer

The common shares account currently has a value of $10,000,000 (as shown in the equity accounts). If the firm sells 2,000,000 new shares at a price of $20 per share, they will receive $40,000,000 in new equity funding ($20 x 2,000,000 shares). The new value of the common shares account will be the sum of the current value ($10,000,000) and the new equity funding ($40,000,000), which equals $50,000,000. Therefore, the new value of the Common Shares account is $50,000,000 or choice A.

The Equity Accounts of Bio-Tech Company Is as Follows