{"id":252755,"date":"2025-07-11T12:13:54","date_gmt":"2025-07-11T12:13:54","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=252755"},"modified":"2025-07-11T12:13:56","modified_gmt":"2025-07-11T12:13:56","slug":"each-of-the-following-transactions-affects-stockholders-equity-except","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/07\/11\/each-of-the-following-transactions-affects-stockholders-equity-except\/","title":{"rendered":"Each of the following transactions affects stockholders’ equity except"},"content":{"rendered":"\n

Each of the following transactions affects stockholders’ equity except <\/p>\n\n\n\n

a. the purchase of land with cash. <\/p>\n\n\n\n

b. a sale on account. <\/p>\n\n\n\n

c. an investment of cash in exchange for common stock. <\/p>\n\n\n\n

d. a payment of dividends.<\/p>\n\n\n\n

The correct answer and explanation is:<\/mark><\/strong><\/p>\n\n\n\n

The correct answer is b. a sale on account<\/strong>.<\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

Stockholders’ equity represents the residual interest in the assets of a company after deducting liabilities. This equity is impacted by transactions involving the issuance of stock, the payment of dividends, and the company’s operations (revenues, expenses, gains, and losses). Let’s break down the given options:<\/p>\n\n\n\n

    \n
  1. Purchase of land with cash<\/strong> (Option a):<\/li>\n<\/ol>\n\n\n\n
      \n
    • This transaction affects the company\u2019s assets but does not<\/strong> impact stockholders’ equity directly. When the company buys land with cash, one asset (cash) is exchanged for another asset (land). There is no change to stockholders’ equity because the total assets remain the same, and no liability or equity is affected.<\/li>\n<\/ul>\n\n\n\n
        \n
      1. Sale on account<\/strong> (Option b):<\/li>\n<\/ol>\n\n\n\n
          \n
        • When a company sells goods or services on account, it records revenue, which increases net income. However, the revenue is reflected in the income statement and does not directly<\/strong> impact stockholders’ equity unless there is a net income or loss. Accounts receivable, an asset, increases, and revenue (a component of stockholders’ equity) is recognized. This transaction affects assets (accounts receivable) but does not<\/strong> immediately impact stockholders’ equity directly at the time of the sale.<\/li>\n<\/ul>\n\n\n\n
            \n
          1. Investment of cash in exchange for common stock<\/strong> (Option c):<\/li>\n<\/ol>\n\n\n\n
              \n
            • When investors put cash into the company in exchange for common stock, stockholders’ equity increases. This is because the company is issuing new shares in exchange for cash. The cash inflow increases both assets and stockholders’ equity (through an increase in common stock).<\/li>\n<\/ul>\n\n\n\n
                \n
              1. Payment of dividends<\/strong> (Option d):<\/li>\n<\/ol>\n\n\n\n
                  \n
                • Paying dividends reduces stockholders’ equity. Dividends represent a distribution of profits to shareholders, and when paid, they decrease retained earnings, which is a component of stockholders’ equity. Therefore, this transaction reduces the equity of the company.<\/li>\n<\/ul>\n\n\n\n

                  So, the sale on account<\/strong> is the only transaction listed that affects assets and revenue but does not directly impact stockholders’ equity until the revenue is realized through the net income at a later point.<\/p>\n","protected":false},"excerpt":{"rendered":"

                  Each of the following transactions affects stockholders’ equity except a. the purchase of land with cash. b. a sale on account. c. an investment of cash in exchange for common stock. d. a payment of dividends. The correct answer and explanation is: The correct answer is b. a sale on account. Explanation: Stockholders’ equity represents […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-252755","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/252755","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=252755"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/252755\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=252755"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=252755"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=252755"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}