Question

Ima Rich purchased 100 shares of Stockits, Inc.'s 1 par value common stock from Stockits for5 per share. How does this transaction affect Stockits' financial statements?

Answer 1

This transaction increases Stockits' assets and equity, while potentially incurring some expenses.

Step-by-step explanation:

This transaction affects Stockits' financial statements in several ways:

1. Assets: Stockits will record an increase in its cash balance as it receives $5 per share from Ima Rich.
2. Equity: Stockits' common stock will increase by 100 shares, which will be recorded at a par value of $1 per share.
3. Revenue: Stockits does not earn any revenue from the sale of its own shares, so there is no impact on its revenue.
4. Expense: Stockits may incur transaction costs, such as brokerage fees, which would be recorded as an expense.

Overall, this transaction increases Stockits' assets and equity, while potentially incurring some expenses.