If a company receives $12,000 from the stockholders to establish a corporation, the effect on the accounting equation would be:
A)Assets decrease $12,000 and equity decreases $12,000.
B)Assets increase $12,000 and liabilities decrease $12,000.
C)Assets increase $12,000 and liabilities increase $12,000.
D)Liabilities increase $12,000 and equity decreases $12,000.
E)Assets increase $12,000 and equity increases $12,000.

Question

Quizplus · Accepted Answer

When a company receives money from stockholders to establish a corporation, it is recorded as an increase in assets (cash) and an increase in equity (common stock). Therefore, the accounting equation would be balanced with an increase of $12,000 in both assets and equity.

If a Company Receives $12,000 from the Stockholders to Establish