question 10 which of the following is true for a corporation that issues 1,000 shares of $2 par common stock…

question 10 which of the following is true for a corporation that issues 1,000 shares of $2 par common stock at $5 per share. a the maximum selling price for these shares of stock is $2 per share. b the per - share dividend amount on these shares is $2. c common stock will increase by $5,000. d total stockholders equity will increase by $5,000.

question 10 which of the following is true for a corporation that issues 1,000 shares of $2 par common stock at $5 per share. a the maximum selling price for these shares of stock is $2 per share. b the per - share dividend amount on these shares is $2. c common stock will increase by $5,000. d total stockholders equity will increase by $5,000.

Answer

Explanation:

Step1: Calculate the amount of cash received

The company issues 1,000 shares at $5 per - share. The cash received is $5\times1000 = $5,000$.

Step2: Analyze the effect on common - stock account

The par value of each share is $2. The common - stock account is increased by the par - value amount, which is $2\times1000=$2,000.

Step3: Analyze the effect on additional paid - in capital

The additional paid - in capital is the amount received above the par value. It is $(5 - 2)\times1000 = $3,000.

Step4: Analyze the effect on total stockholders' equity

Total stockholders' equity increases by the amount of cash received. Since cash received is $5,000, total stockholders' equity increases by $5,000.

Answer:

D. Total stockholders' equity will increase by $5,000.