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Tandem Company borrowed $32,000 by issuing common stock. Which of the following choices accurately reflects how this event affects the company's financial statements?

Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow
A. 32,000 = NA + 32,000 NA − NA = NA 32,000 FA
B. 32,000 = NA + 32,000 32,000 − NA = 32,000 32,000 FA
C. 32,000 = 32,000 + NA 32,000 − NA = NA 32,000 FA
D. 32,000 = 32,000 + NA 32,000 − NA = 32,000 32,000 OA

a. Option A
b. Option B
c. Option C
d. Option D

Respuesta :

Answer:

Option D

Explanation:

When the company borrows by issuing shares the cash will be received of $32000 and this will ultimately increase the liability of notes payable with $32,000. There will be no effect on the income statement but cash inflow will be recorded for financing activities in Statement of cashflows, Therefore Option D is matching perfectly.  

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