Question

What was the significance of Carrot's action on January 1, year 1, when he paid $22,900 for 5 percent of the stock in Root Corp.?

A) Carrot increased his ownership stake in Root Corp.
B) Carrot received a loan from Root Corp.
C) Root Corp. incurred a loss in its financial statement.
D) The market value of Root Corp.'s stock decreased.

Answer 1

Carrot's action of paying $22,900 for 5 percent of the stock in Root Corp. increased his ownership stake in the company.

Step-by-step explanation:

Carrot's action of paying $22,900 for 5 percent of the stock in Root Corp. on January 1, year 1, has the significance of increasing Carrot's ownership stake in Root Corp. While the question does not provide details about Carrot's previous ownership stake, it can be inferred that Carrot now has a higher percentage of ownership in the company. This means that Carrot has more influence and decision-making power within Root Corp.