Aurum Services acquired 100,000 shares of Gamma Metals on January 1, 2015. Gamma pays a cash dividend of $0.25 per share on March 2, 2015. With the current investment, Aurum Services holds 8% of Gamma. In the journal entry on March 2, 2015:

Question

Quizplus · Accepted Answer

Since Aurum Services holds only 8% of Gamma, it does not have significant influence over the operations of Gamma and therefore, should account for its investment as available-for-sale. The dividend received is a return on investment and should be recognized as revenue. Therefore, the journal entry should debit Cash and credit Dividend Revenue.

Aurum Services Acquired 100,000 Shares of Gamma Metals on January