Question

If Baldwin issued 1000 shares of common stock at last year's end price, the effect on the balance sheet would be:_______

a. Equity would decrease by $6,468
b. Equity would increase by $64,679
c. Retained earnings would increase by $6,468
d. Retained earnings would increase by $64,679

Answer 1

Answer: b. Equity would increase by $64,679

Step-by-step explanation:

You included no figures from Baldwin's financials but the above is the only feasible answer.

When more Equity is issued as was the case here, Equity will increase not decrease (option A is therefore wrong).

Retained earnings are the portion of Net Income that are not paid out by the company as dividends and so have nothing to do with stock issuance which renders options C and D wrong.

Option B speaks of an increase in Equity and so is most likely correct.