Green Services Inc.invests its excess cash in Creative Technologies Inc.and acquires 1,300 shares for $22.50 per share.Green Services Inc.owns less than 1% of Creative's voting stock and plans to hold the stock for two years.Which of the following is the correct journal entry for the transaction?

Question

Quizplus · Accepted Answer

The journal entry for the acquisition of 1,300 shares of Creative Technologies Inc. by Green Services Inc. for $22.50 per share would be as follows:

Investment in Creative Technologies Inc. (1300 shares @ $22.50 per share)  = $29,250
  Cash  = $29,250

Option D is the correct entry as it shows the acquisition of shares using cash. Option A shows the acquisition of shares using accounts receivable, which is incorrect. Option B and C show the acquisition of shares at a different price, which is also incorrect.