On January 12, Year 1, Gilliam Corporation issued 550 shares of $12 par-value common stock for $15 per share. The number of shares authorized is 5,000, and the number of shares outstanding prior to this transaction is 1,200. Which of the following answers describes the effect of the January 12, Year 1 transaction?

Question

Quizplus · Accepted Answer

The issuance of 550 new shares at a price of $15 per share results in an increase in common stock of $8,250 ($12 par value × 550 shares). The new shares increase the number of outstanding shares to 1,750 (1,200 + 550). As the company has authorized 5,000 shares and only 1,750 are outstanding, there is still room for the company to issue more shares in the future.

On January 12, Year 1, Gilliam Corporation Issued 550 Shares