Question

If Baldwin issued 1000 shares of common stock at last year's end price, the effect on the balance sheet would be: Select: 1 Retained earnings would increase by $40,076 Equity would decrease by $4,008 Equity would increase by $40,076 Retained earnings would increase by $4,008

Answer 1

Equity would increase by $40,076

Step-by-step explanation:

A funds could be raise from different sources by a company which include:

• Shares Issuance
• Debt financing.
• Internal sources of finances (retained earnings)

If a company issues common shares It will effect the Common stock value and Add-in-capital excess of par common shares account value will be changed. Retained earning will not be changes in case of issuance of common share but it can be in case of stock dividend.

So, from the given option most appropriate is increase in the equity value.