MotorCity,Inc.purchased 40,000 shares of Shaw 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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When a company purchases between 20% to 50% of another company's outstanding stock, it is considered a significant influence investment and the equity method of accounting is used. Therefore, the entry to record the transaction would include a debit to Equity Method Investments for $232,000, representing the cost of the investment. Option A is incorrect because Debt Investments are used for investments with a maturity date, not for significant influence investments. Option C is incorrect because a credit would not be used to record the purchase of an investment. Option D and E are incorrect because they pertain to different investment classifications and are not applicable to this scenario.