Highland Cutlery Acquired as a Long-Term Investment Some of the Common

Highland Cutlery acquired as a long-term investment some of the common stock of LTS Company on December 31,2X12.During 2X13,LTS Company had net income of $300,000 and declared and paid cash dividends of $90,000.What journal entry would Highland Cutlery make for 2X13 to recognize the net income of LTS Company,assuming that Highland Cutlery acquired 40% of the outstanding common stock of LTS Company?

A) $\begin{array} { l l l } \text { Deferred lnvestment lncome } & 120,000 & \\\text { Unrealized Gain on Long-term Investment } & & 120,000 \\\end{array}$

B) $\begin{array}{lccc}\text { Investment in LTS Company } & 120,000 & \\\quad \text { Investment Revenue } & & 120,000 \\\end{array}$

C) $\begin{array}{lccc}\text { Investment in LTS Company } & 120,000 & \\\quad \text { Unearned Revenue } & & 120,000 \\\end{array}$

D) $\begin{array}{lccc}\text { Investment in LTS Company } & 120,000 & \\\quad \text { Unrealized Gain on Long-term Investments } & & 120,000\end{array}$
E) No journal entry is necessary.