What will happen to retained earnings when a corporation issues 1,000 shares of $1 par stock for $10 per share?
A) It will increase by $1,000.
B) It will increase by $9,000.
C) It will decrease by $9,000.
D) It will remain unchanged.

Question

Quizplus · Accepted Answer

Retained earnings are profits that a corporation has earned but not distributed as dividends. When new shares are issued, the total amount of retained earnings will not change as this transaction does not involve any transfer of profits to shareholders. However, the total equity of the company will increase by $10,000 (1,000 shares x $10 per share) because the company has received additional funds through the sale of its stock.

What Will Happen to Retained Earnings When a Corporation Issues