Answer:
D) a reduction to additional paid-in capital.
Explanation:
The investment banker fee is taking from the 100,000 dollars before purchasing Eurat Company shares thus, we purchase shares for:
proceeds from sales 100,000 - banker fees 35,000 = 65,000 net proceeds to purchase Eurat Company
the face value of the stock is 5,00 0shares x $1 = 5,000
additional paid-in $65,000 - $5,000 = $60,000
The journal entry will be:
Eurat company investment 65,000
common stock 5,000
additional paid-in 60,000
A lower fee would increase the available for investment and additional paid-in as common stock cannot increase higher than the face value
this makes option D correct.
