Which of the following would result when a company sells additional shares of common stock for cash?
A)A noncurrent liability and a financing cash flow are created.
B)Common stock increases and a financing cash flow results.
C)A noncurrent liability and an investing cash flow are created.
D)Common stock increases and an investing cash flow results.

Question

Quizplus · Accepted Answer

When a company sells additional shares of common stock for cash, it increases the common stock account and generates a financing cash flow, as cash is flowing into the company from investors who are purchasing the new shares. Therefore, B is the correct choice. A noncurrent liability would only be created if the company issued bonds, and an investing cash flow would only be created if the company purchased long-term assets such as property, plant, and equipment.

Which of the Following Would Result When a Company Sells