Question

Juarez Company acquired $1,000 cash from the issue of common stock. Which of the following shows how this event will affect the company's accounting equation? The letters ""NA"" indicate that the component of the equation is not affected.

-Assets=Liabilities + Common Stock + Retained Earnings
$1,000 = $400 + $400 + $400
-Assets = Liabilities + Common Stock + Retained Earnings
$1,000 = $1,000 + NA + NA
-Assets = Liabilities + Common Stock + Retained Earnings
$1,000 = NA + $1,000 + NA
-Assets = Liabilities + Common Stock + Retained Earnings
$1,000 = NA + $600 + $600

Answer 1

Juarez Company's accounting equation after acquiring $1,000 cash from issuing common stock would show an increase of $1,000 in both assets and common stock, with no change in liabilities or retained earnings.

Step-by-step explanation:

When Juarez Company acquired $1,000 cash from the issue of common stock, it affected the company's accounting equation specifically by increasing assets and increasing equity. Since the transaction involves issuing stock for cash, there is no liability created, so liabilities are not affected (NA). The correct representation of this transaction in the accounting equation would be:

Assets = Liabilities + Common Stock + Retained Earnings
$1,000 = NA + $1,000 + NA

This shows that the company's assets have increased by $1,000 due to the cash received, and the equity has increased by $1,000 through the issue of common stock, with no change in liabilities or retained earnings.