An investor receives a cash dividend from a long-term available-for-sale investment. Which journal entry is required?
A.a debit to Cash and a credit to Dividend Revenue
B.a debit to Cash and a credit to Interest Revenue
C.a debit to Cash and credit to Investment in Available-for-Sale Securities
D.a debit to Cash and credit to Interest Receivable
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A long-term investment in available-for-sale securities was acquired at a cost of $40,000. At year-end, the fair value of the securities is $42,250. The year-end adjusting entry requires a:
A.credit Investment in Available-for-Sale Securities for $2,250.
B.debit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,250.
C.credit Allowance to Adjust Investment in Available-for-Sale Securities to Market for $2,250.
D.debit Unrealized Loss on Investment in Available-for-Sale Securities for $2,250.
On January 1, 2014, Jude Corporation purchases stock in Gelco Company. Jude Corporation owns 1% of the outstanding stock of Gelco Company. Jude Corporation intends to hold the stock for longer than one year. How should Jude Corporation classify this stock?
A.trading security
B.held-to-maturity investment in bonds
C.equity-method investment
D.investment in available-for-sale securities
On January 1, 2014, a company purchased long-term available-for-sale securities in one company. The cost was $100,000 and the investor owns 5% of the outstanding common stock of the investee. The investor does not use an allowance account to adjust the investment. At December 31, 2014, the fair value of the investment is $97,000. What journal entry is needed on December 31, 2014?
A.debit Unrealized Loss on Investment in Available-for-Sale Securities for $3,000 and credit Investment in Available-for-Sale Securities for $3,000
B.debit Investment in Available-for-Sale Securities for $2,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $2,000
C.debit Investment in Available-for-Sale Securities for $5,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $5,000
D.debit Investment in Available-for-Sale Securities for $3,000 and credit Unrealized Gain on Investment in Available-for-Sale Securities for $3,000
When an investor owns between 20% and 50% of the outstanding stock of another company, the ________ method is used to account for the stock investment.
A.fair value
B.equity
C.consolidated
D.available-for-sale
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