Question

Bart Company's common stock account increased by $5 million. The company issues only no-par shares. In the absence of additional information, you would assume that Bart?

1) Issued additional shares of stock
2) Repurchased shares of stock
3) Experienced a decrease in stockholders' equity
4) Received additional investments from shareholders

Answer 1

Assuming Bart Company's common stock account increased by $5 million due to the issuance of no-par shares, it is likely that the company issued additional shares and received investments from shareholders.

Step-by-step explanation:

When Bart Company's common stock account increased by $5 million and the company issues only no-par shares, we would assume that Bart has issued additional shares of stock. This is because an increase in the common stock account typically reflects the inflow of equity capital into the business, which can result from the sale of new shares to shareholders. In such cases, the company receives additional investments from shareholders, who in turn expect a rate of return, either through dividends or by selling the stock at a higher price later (a 'capital gain'). Repurchasing shares or a decrease in stockholders' equity would not result in an increase to the common stock account.