Share issuance increases net assets; debentures do not

Steps:

• Calculate proceeds from ordinary shares: 50,000 shares × $3 each =$150,000.
• Record share issuance: assets increase by $150,000 (cash), equity increases by$150,000 ($50,000 par +$100,000 premium), so net assets rise by $150,000.
• Record debenture issuance: assets increase by $25,000 (cash), liabilities increase by$25,000, so net assets unchanged.
• Total net assets increase: $150,000 from shares +$0 from debentures = $150,000.

Why C is correct:

• Under the accounting equation (Assets = Liabilities + Equity), equity financing increases net assets (equity) by the full proceeds received.

Why the others are wrong:

• A. Includes par value of shares ($50,000) plus debentures ($25,000), ignoring issue premium and debenture neutrality.
• B. No logical calculation matches this amount based on given figures.
• D. Adds full share proceeds ($150,000) to debentures ($25,000), but debt does not boost net assets.

Final answer: C