Modern Resorts received $72,000 cash from its investors in exchange for shares of the company’s stock....
Modern Resorts received $72,000 cash from its investors in exchange for shares of the company’s stock.
During the same year, Modern received cash from customers for hotel rooms totaling $820,000, and distributed cash dividends to shareholders totaling $100,000.
How much is the net effect of the three events on the company’s income statement?
Select one:
a. 720,000
b. 820,000
c. 748,000
d. 638,000
Homework Answers
Net effect of the three events is b. 820,000.
Here it is assumed that dividend of $100,000 are paid to common stockholders.
Dividend paid to common stock holders are deducted from retained earnings and have no effect on income statement.
Also amount of 720,000 received from investors against common stock of the company has no effect on income statement.
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Modern Resorts received $72,000 cash from its investors in
exchange for shares of the company’s stock....
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