Below are the 2011 and 2012 year-end balance sheets for Wolken Enterprises: Assets: 2012 2011 Cash $ 200 , 000 $ 170 , 000 Accounts receivable 864 , 000 700 , 000 Inventories 2 , 000 , 000 1 , 400 , 000 Total current assets $ 3 , 064 , 000 $ 2 , 270 , 000 Net fixed assets 6 , 000 , 000 5 , 600 , 000 Total assets $ 9 , 064 , 000 $ 7 , 870 , 000 \begin{array}{lrr} ext { Assets: } & 2012 & 2011 \ ext { Cash } & \$ 200,000 & \$ 170,000 \ ext { Accounts receivable } & 864,000 & 700,000 \ ext { Inventories } & 2,000,000 & 1,400,000 \ ext { Total current assets } & \$ 3,064,000 & \$ 2,270,000 \ ext { Net fixed assets } & 6,000,000 & 5,600,000 \ ext { Total assets } & \$ 9,064,000 & \$ 7,870,000\end{array} Assets: Cash Accounts receivable Inventories Total current assets Net fixed assets Total assets 2012 $200 , 000 864 , 000 2 , 000 , 000 $3 , 064 , 000 6 , 000 , 000 $9 , 064 , 000 2011 $170 , 000 700 , 000 1 , 400 , 000 $2 , 270 , 000 5 , 600 , 000 $7 , 870 , 000 Liabilities and equity: Accounts payable $ 1 , 400 , 000 $ 1 , 090 , 000 Notes payable 1 , 600 , 000 1 , 800 , 000 Total current liabilities $ 3 , 000 , 000 ‾ $ 2 , 890 , 000 ‾ Long-term debt 2 , 400 , 000 2 , 400 , 000 Common stock 3 , 000 , 000 2 , 000 , 000 Retained earnings 664 , 000 ‾ 580 , 000 Total common equity $ 3 , 664 , 000 $ 2 , 580 , 000 Total liabilities and equity $ 9 , 064 , 000 ‾ $ 7 , 870 , 000 \begin{array}{rr} ext { Liabilities and equity: } \ ext { Accounts payable } & & \$ 1,400,000 & \$ 1,090,000 \ ext { Notes payable } & & 1,600,000 & 1,800,000 \ ext { Total current liabilities } & \underline{\$ 3,000,000 } & & \underline{\$ 2,890,000} \ ext {Long-term debt} & & 2,400,000 & 2,400,000 \ ext { Common stock } & & 3,000,000 & 2,000,000 \ ext {Retained earnings } & & \underline{664,000} & 580,000 \ ext {Total common equity} & & \$ 3,664,000 & \$ 2,580,000 \ ext { Total liabilities and equity } & \underline{ \$ 9,064,000 } & & \$ 7,870,000\end{array} Liabilities and equity: Accounts payable Notes payable Total current liabilities Long-term debt Common stock Retained earnings Total common equity Total liabilities and equity $3 , 000 , 000 $9 , 064 , 000 $1 , 400 , 000 1 , 600 , 000 2 , 400 , 000 3 , 000 , 000 664 , 000 $3 , 664 , 000 $1 , 090 , 000 1 , 800 , 000 $2 , 890 , 000 2 , 400 , 000 2 , 000 , 000 580 , 000 $2 , 580 , 000 $7 , 870 , 000 Wolken has never paid a dividend on its common share,and it issued $2,400,000 of 10-year non-callable,long-term debt in 2011.As of the end of 2012,none of the principal on this debt had been repaid.Assume that the company's sales in 2011 and 2012 were the same.Which of the following statements must be correct?A) Wolken increased its short-term bank debt in 2012.B) Wolken issued long-term debt in 2012.C) Wolken issued new common shares in 2012.D) Wolken repurchased some common shares in 2012.

Question

Below are the 2011 and 2012 year-end balance sheets for Wolken Enterprises:​​​    Assets:  2012 2011  Cash  $ 200 , 000 $ 170 , 000  Accounts receivable  864 , 000 700 , 000  Inventories  2 , 000 , 000 1 , 400 , 000  Total current assets  $ 3 , 064 , 000 $ 2 , 270 , 000  Net fixed assets  6 , 000 , 000 5 , 600 , 000  Total assets  $ 9 , 064 , 000 $ 7 , 870 , 000 \begin{array}{lrr}	ext { Assets: }  &  2012  &  2011 \	ext { Cash }  &  \$ 200,000  &  \$ 170,000 \	ext { Accounts receivable }  &  864,000  &  700,000 \	ext { Inventories }  &  2,000,000  &  1,400,000 \	ext { Total current assets }  &  \$ 3,064,000  &  \$ 2,270,000 \	ext { Net fixed assets }  &  6,000,000  &  5,600,000 \	ext { Total assets }  &  \$ 9,064,000  &  \$ 7,870,000\end{array}  Assets:   Cash   Accounts receivable   Inventories   Total current assets   Net fixed assets   Total assets  ​ 2012 $200 , 000 864 , 000 2 , 000 , 000 $3 , 064 , 000 6 , 000 , 000 $9 , 064 , 000 ​ 2011 $170 , 000 700 , 000 1 , 400 , 000 $2 , 270 , 000 5 , 600 , 000 $7 , 870 , 000 ​  Liabilities and equity:   Accounts payable  $ 1 , 400 , 000 $ 1 , 090 , 000  Notes payable  1 , 600 , 000 1 , 800 , 000  Total current liabilities  $ 3 , 000 , 000 ‾ $ 2 , 890 , 000 ‾ Long-term debt 2 , 400 , 000 2 , 400 , 000  Common stock  3 , 000 , 000 2 , 000 , 000 Retained earnings  664 , 000 ‾ 580 , 000 Total common equity $ 3 , 664 , 000 $ 2 , 580 , 000  Total liabilities and equity  $ 9 , 064 , 000 ‾ $ 7 , 870 , 000 \begin{array}{rr}	ext {  Liabilities and equity:   } \	ext {  Accounts payable   }  & & \$ 1,400,000  &  \$ 1,090,000 \	ext {   Notes payable  }  & & 1,600,000  &  1,800,000 \	ext {   Total current liabilities  }  & \underline{\$ 3,000,000 } & &  \underline{\$ 2,890,000} \	ext {Long-term debt}  & & 2,400,000  &  2,400,000 \	ext {  Common stock   }  & & 3,000,000  &  2,000,000 \	ext {Retained earnings }  & & \underline{664,000}  &  580,000 \	ext {Total common equity}  & & \$ 3,664,000  &  \$ 2,580,000 \	ext { Total liabilities and equity }  & \underline{ \$ 9,064,000 } & &  \$ 7,870,000\end{array}  Liabilities and equity:   Accounts payable   Notes payable   Total current liabilities  Long-term debt  Common stock  Retained earnings  Total common equity  Total liabilities and equity  ​ $3 , 000 , 000 ​ $9 , 064 , 000 ​ ​ $1 , 400 , 000 1 , 600 , 000 2 , 400 , 000 3 , 000 , 000 664 , 000 ​ $3 , 664 , 000 ​ $1 , 090 , 000 1 , 800 , 000 $2 , 890 , 000 ​ 2 , 400 , 000 2 , 000 , 000 580 , 000 $2 , 580 , 000 $7 , 870 , 000 ​   ​Wolken has never paid a dividend on its common share,and it issued $2,400,000 of 10-year non-callable,long-term debt in 2011.As of the end of 2012,none of the principal on this debt had been repaid.Assume that the company's sales in 2011 and 2012 were the same.Which of the following statements must be correct?A) Wolken increased its short-term bank debt in 2012.B) Wolken issued long-term debt in 2012.C) Wolken issued new common shares in 2012.D) Wolken repurchased some common shares in 2012.

Marcelle Fernandez · Accepted Answer

Final Answer : C, Explanation :  Wolken Enterprises increased its common stock from $2,000,000 in 2011 to $3,000,000 in 2012, indicating that the company issued new common shares in 2012.

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