Laurie Dexter starts a business called Camden Cleaning.Dexter invests $10,000 cash in Camden in exchange for its common stock.How would Camden record this transaction?
A)Cash increases by $10,000 and Cleaning Revenue increases by $10,000.
B)Cash decreases by $10,000 and Cleaning Revenue increases by $10,000.
C)Cash increases by $10,000 and Common Stock increases by $10,000.
D)Cash increases by $10,000 and Common Stock decreases by $10,000.
E)Cash decreases by $10,000 and Cleaning Expense increases by $10,000.

Question

Quizplus · Accepted Answer

When Laurie Dexter invests $10,000 cash in Camden Cleaning in exchange for its common stock, the transaction is recorded as an increase in cash and an increase in common stock. This is because the company is issuing stock to the investor, indicating that the investor now owns a portion of the company. Therefore, the accounting equation is balanced by increasing both the assets and the equity accounts.

Laurie Dexter Starts a Business Called Camden Cleaning