Question

If Baldwin issued 1000 shares of common stock at last year's end price, the effect on the balance sheet would be:________

a) Save Answer Retained earnings would increase by $6,323
b) Retained earnings would increase by $63,228
c) Equity would decrease by $6,323
d) Equity would increase by $63,228

Answer 1

d) Equity would increase by $63,228

Step-by-step explanation:

We are not given any information about stock prices, but we do not need them. Whenever new common stocks are issued, stockholders' equity will increase (always).

Retained earnings are affected by net income and dividends:

• net income increases retained earnings
• dividends decrease retained earnings