Question

Carl and Stefanie each invest $15,000 in a business and are given shares of stock in Thibeau Industries as evidence of their ownership interests. For this transaction, identify the effect on the accounting equation.

a. Liabilities increase and stockholders' equity decreases.
b. Assets increase and liabilities increase.
c. Assets increase and stockholders' equity increases.
d. Liabilities decrease and assets decrease.

Answer 1

The answer is C. Assets increase and stockholders' equity increases

Step-by-step explanation:

For Carl and Stefanie, their asset(cash) has been increased by $15,000. Probably this cash will be put in the bank. If any one of the wants to pull out of the business, he can collect his money back.

Also, equity (capital) will also increase by the number of shares this $15,000 can obtain.

All the other options were wrong because there is no liability in this transaction.