Beige Corporation pays $500,000 to acquire 40% of the equity securities of Olive Technologies on May 5, 2015. Which of the following will be included in the journal entry to record this transaction?

Question

Quizplus · Accepted Answer

When an investment is made in equity securities, the Long-term Investments account is debited for the cost of acquiring the securities. In this case, the investment is in Olive Technologies, so Long-term Investments-Olive Technologies will be debited by $500,000 to record the acquisition. The other options are not applicable in this scenario as they relate to different types of investments (trading or available-for-sale).

Beige Corporation Pays $500,000 to Acquire 40% of the Equity