Composite, Inc., a firm specializing in building materials, engaged in the following transaction during 2013: issued 2,000 shares of common stock for $7,500 million in cash.Indicate the effects of the transaction on the balance sheet equation.(Composite Inc.applies U.S.GAAP financial reporting standards, and reports its results in millions of dollars.)
A)Liabilities +$7,500 million; Shareholders' Equity -$7,500 million
B)Liabilities +$7,500 million; Shareholders' Equity +$7,500 million
C)Assets +$7,500 million ; Liabilities +$7,500 million
D)Assets +$7,500 million ; Shareholders' Equity +$7,500 million
E)Assets -$7,500 million ; Liabilities -$7,500 million

Question

Quizplus · Accepted Answer

The issuance of 2,000 shares of common stock for $7,500 million in cash has the following effects on the balance sheet equation:
Assets +$7,500 million (cash increases)
Shareholders' Equity +$7,500 million (common stock increases)
Therefore, the correct answer is D.