Hardin Park Company had these transactions pertaining to stock investments Feb. 1 Purchased 5,000 shares of Raley Company (10%) for $89,000 cash.
June 1 Received cash dividends of $1 per share on Raley stock.
Oct) 1 Sold 2,000 shares of Raley stock for 39,000.
Dec) 1 Received cash dividends of $2 per share on Reley stock.
The entry to record the purchase of the Raley stock would include a
A) credit to the Stock Investments account for $89,000.
B) credit to Cash for $90,000
C) debit to the Stock Investments account for $89,000.
D) debit to Investment Expense for $1,000.

Question

Quizplus · Accepted Answer

When purchasing stock, the debit is made to the Stock Investments account to reflect the investment in the company. Cash is credited for the amount paid, but in this case, the amount paid was $89,000, not $90,000. Investment expense is not recorded until the end of the period, when the change in value of the investment is realized.

Hardin Park Company Had These Transactions Pertaining to Stock Investments