Northern Corporation invested $800 cash in South Company stock. Which of the following describes the effects of this transaction on Northern Corporation's books?

Question

Quizplus · Accepted Answer

Investing in another company's stock would be an asset exchange transaction that would increase one asset (investments) and decrease another asset (cash). Therefore, it would have no net impact on assets. It would not affect the income statement, but would be reported as a cash outflow for investing activities on the statement of cash flows.

Northern Corporation Invested $800 Cash in South Company Stock