A company received $30,000 cash and issued common stock in exchange.In transaction analysis,how does this transaction affect the accounting equation?
A)Add $30,000 to Cash account and add $30,000 to Retained Earnings account.
B)Add $30,000 to Cash account and add $30,000 to Revenue account.
C)Add $30,000 to Dividends account and subtract $30,000 to Retained Earnings account.
D)Add $30,000 to Cash account and add $30,000 to Common Stock account.

Question

Quizplus · Accepted Answer

When a company receives cash and issues common stock in exchange, it increases cash and increases common stock. Therefore, the correct choice is to add $30,000 to Cash account and add $30,000 to Common Stock account, which is option D. Option A is incorrect because it adds the cash to Retained Earnings, which is not affected in this transaction. Option B is incorrect because the company did not earn revenue by issuing common stock. Option C is incorrect because dividends should only be recorded when they are declared and paid to shareholders, not when common stock is issued.

A Company Received $30,000 Cash and Issued Common Stock in Exchange.In