Question

Jack Pickle decided to start a small business as a corporation. His initial investment was $4,000 cash in exchange for common stock. Demonstrate how to record this transaction in the accounting equation.

a. Decrease Cash by $4,000; decrease Common Stock by $4,000.
b. Increase Cash by $4,000; increase Revenues by $4,000.
c. Increase Cash by $4,000; decrease Common Stock by $4,000.
d. Increase Cash by $4,000; Increase Common Stock by $4,000.

Answer 1

d. Increase Cash by $4,000; Increase Common Stock by $4,000.

Step-by-step explanation:

The contribution definively increase cash as now the company has 4,000 avilable for use in the future operations.

Then, as the company issued common stock They are increasing as well. Before the contribution it had zero. now it has common stock for the value of 4,000 dollars