Rain Forever Corporation had a beginning balance in common stock of $30,000 and additional paid in capital-common stock of $350,000. At the end of the year the balances in the accounts were $40,000 and $410,000, respectively. The only transaction involving stock was the sale of stock. Cash received from the sale of the stock was:

Question

Quizplus · Accepted Answer

The increase in common stock balance ($40,000 - $30,000) is $10,000, which represents the sale of stock. The remaining increase in additional paid in capital-common stock ($410,000 - $350,000) represents the excess of the sale price over the par value of the stock. Therefore, the cash received from the sale of the stock was $10,000 (the increase in common stock balance) plus the par value of the stock sold, which is not given in the information provided. Option A is incorrect because it assumes that all of the increase in additional paid in capital-common stock is due to the sale of stock, which is not necessarily true. Option C is also incorrect because the amount is not plausible given the information provided. Option D is incorrect because a stock transaction occurred, so there must be cash received from the sale of stock.

Rain Forever Corporation Had a Beginning Balance in Common Stock