Question

lodge outfitters issues 1,500 shares of its $0.01 par value common stock to provide funds for further expansion. assume the issue price is $12 per share. determine the financial statement effects of the issuance of common stock.

Answer 1

The issuance of common stock by Lodge Outfitters will increase the equity and cash sections of the balance sheet, with no direct impact on the income statement.

Step-by-step explanation:

The issuance of common stock by Lodge Outfitters will have several financial statement effects. Here are some of them:

• Increase in the equity section of the balance sheet: The issuance of 1,500 shares of common stock will result in an increase in the common stock account on the balance sheet. Each share has a par value of $0.01, so the common stock account will increase by $15 (1,500 shares x $0.01).
• Increase in the cash section of the balance sheet: Since each share is issued at $12, the company will receive $18,000 (1,500 shares x $12) in cash from the issuance of the common stock. This will result in an increase in the cash account on the balance sheet.
• No impact on income statement: The issuance of common stock does not directly impact the income statement. However, if the company uses the funds raised from the issuance to finance expansion activities and generate additional revenue, it may have an indirect positive impact on the income statement in the future.