The Flamingo Corporation issued $30 million in new common stock in 2008.It used $22 million of the proceeds to replace obsolete equipment in its factory and $8 million to repay bank loans.As a result, investment:
A)of $8 million has occurred.
B)of $22 million has occurred.
C)of $30 million has occurred.
D)has not occurred.

Question

Quizplus · Accepted Answer

Investment refers to the use of the newly acquired funds for productive purposes. In this case, $22 million was used to replace obsolete equipment, indicating investment has occurred. The remaining $8 million was used to repay bank loans, which is not considered investment.

The Flamingo Corporation Issued $30 Million in New Common Stock