Question

Ogilvie Corp. issued 23,000 shares of no-par stock for $10 per share. Ogilvie was authorized to issue 46,000 shares. What effect will this event have on the company's financial statements?

Answer 1

Answer:

Oglivie Corp.'s assets (cash account) will increase be $230,000 and its equity (common stock account) will also increase by $230,000.

Every time a company issues stock and sells them, both its assets and equity have to increase in order to keep a balance in the balance sheet. Since Oglivie's stock are no-par, all of the money received should be included in the common stock account.