At the time of acquisition of a debt investment,

Question

Quizplus · Accepted Answer

The cost principle applies at the time of acquisition of a debt investment, which means that the investment is recorded at its cost. This cost includes not only the face value of the investment but also any transaction costs such as brokerage fees. Therefore, a journal entry is required to record the acquisition of the debt investment, and the Investment account is debited for the cost of the investment. Option A is incorrect because a journal entry is required. Option C is incorrect because the Stock Investments account is used for equity securities, not debt securities. Option D is partially correct in stating that the Investment account is credited, but it incorrectly states that brokerage fees are added to the cost of the investment.

At the Time of Acquisition of a Debt Investment