Daily Grind,Inc.began by selling $15,000 of common stock to its owners in exchange for cash.The effect of this transaction on the accounting equation is:
A)Total shareholders' equity
B)Total shareholders' equity
C)Total shareholders' equity
D)Total shareholders' equity

Question

Daily Grind,Inc.began by selling $15,000 of common stock to its owners in exchange for cash.The effect of this transaction on the accounting equation is:
A)Total shareholders' equity 
B)Total shareholders' equity 
C)Total shareholders' equity 
D)Total shareholders' equity

Quizplus · Accepted Answer

The transaction involves the sale of common stock, which increases the company's assets (cash) and equity (common stock). Therefore, the accounting equation can be represented as:

Assets = Liabilities + Shareholders' Equity
$15,000 (Cash) = 0 + $15,000 (Common Stock)

Option B correctly shows an increase in shareholders' equity by $15,000.