Daffy Duct, Inc., began operations in January by issuing 100,000 shares of $1 par value common stock for $5 per share. It also issued 10,000 shares of $50 par value, 5%, cumulative preferred stock for $50 each. Net income for the year was $500,000 and dividends were $44,000. What happens to liabilities?

A. 0 No Effect
B. 100,000 Cash
C. (100,000) Cash
D. 500,000 Common Stock
E. 100,000 Common Stock
F. (100,000) Common Stock
G. (500,000) Common Stock
H. 500,000 Cash
I. (500,000) Cash
J. 400,000 Common Stock; 100,000 Paid-in Capital in Excess of Par
K. 100,000 Common Stock; 400,000 Paid-in Capital in Excess of Par
L. (400,000) Common Stock; (100,000) Paid-in Capital in Excess of Par
M. (100,000) Common Stock; (400,000) Paid-in Capital in Excess of Par

Ans: A. 0 No Effect