On February 15,Jewel Company buys notes of Marcelo Corp.for $200,110.The investment is classified as long-term available-for-sale securities.This is the company's first and only investment in available-for-sale securities.The journal entry to record the purchase on February 15 is:
A)Debit Debt Investments-HTM $200,100; credit Cash $200,100.
B)Debit Debt Investments-AFS $200,110; credit Notes Payable $200,100.
C)Debit Debt Investments-Trading $200,100; credit Cash $200,100.
D)Debit Debt Investments-Trading $200,110; credit Notes Payable $200,110.
E)Debit Long-Term Investments-AFS $200,110; credit Cash $200,110.

Question

Quizplus · Accepted Answer

The transaction involves the purchase of long-term available-for-sale securities, which should be recorded as a debit to Long-Term Investments-AFS and a credit to Cash. Option E correctly identifies these accounts and their corresponding amounts. The other options either misclassify the investment (option A and C) or include unnecessary accounts (option B and D).

On February 15,Jewel Company Buys Notes of Marcelo Corp