Firelog Company began business on July 1,20X8,by selling 1,000 shares of $1 par value capital stock at $20 per share.The effect of this transaction on Firelog Company would be to

Question

Quizplus · Accepted Answer

The correct answer is D because when a company sells shares, the capital stock at par account increases by the par value of the shares sold (1,000 shares at $1 par value equals $1,000), the paid-in capital in excess of par increases by the amount received over the par value (1,000 shares sold at $20 each, so $19,000 over par), and the cash account increases by the total amount received from the sale ($20,000).

Firelog Company Began Business on July 1,20X8,by Selling 1,000 Shares