When Common Stock is sold at a premium:A) an asset increases and stockholders' equity increases.B) an asset increases and liabilities increase.C) a liability increases and stockholders' equity increases.D) an asset decreases and stockholders' equity decreases.

Question

When Common Stock is sold at a premium:A)  an asset increases and stockholders' equity increases.B)  an asset increases and liabilities increase.C)  a liability increases and stockholders' equity increases.D)  an asset decreases and stockholders' equity decreases.

Avian Boswell · Accepted Answer

Final Answer : A, Explanation :  When Common Stock is sold at a premium, the company receives more money than the par value of the shares, which increases an asset (cash or other forms of payment) and also increases stockholders' equity due to the additional paid-in capital over the par value.

When Common Stock is sold at a premium:

A) an asset increases and stockholders' equity increases.
B) an asset increases and liabilities increase.
C) a liability increases and stockholders' equity increases.
D) an asset decreases and stockholders' equity decreases.

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