Vans purchased 40,000 shares of Skechs common stock for $232,000.This represents 40% of the outstanding stock.The entry to record the transaction includes a:

Question

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The entry to record the purchase of common stock is a debit to the Long-Term Investments account for the cost of the investment. In this case, Vans purchased 40,000 shares for $232,000, which represents 40% of the outstanding stock. Therefore, the correct entry would be a debit to Long-Term Investments for $232,000. Choice A is incorrect because $92,800 is 40% of the outstanding stock, but it is not the cost of the investment. Choices C, D, and E are also incorrect because they do not reflect the correct account to which the cost of the investment should be debited.

Vans Purchased 40,000 Shares of Skechs Common Stock for $232,000