Question

Stewart soaps began business by issuing 25,000 shares of $5 par value common stock for $20 per share. during its first year, the corporation sustained a net loss of $5,000. the year-end balance sheet would show

Answer 1

Issuing 25,000 shares of $5 par value common stock for $20 per share.

Cash (25,000 x 20) 500,000
Common stock (25,000 x 5) 125,000
Additional Paid-In Capital (25,000 x 15) 375,000

The net loss will only be reflected as a deduction from retained earnings. Retained earnings is where the net income or net loss of the company will be under in the year-end balance sheet. It is the balance of all income and loss the company has since its inception.