Table 16-1
On January 2, 2017, Logan Corporation purchased 2,000 common shares in Downright Corporation for $55 per share and paid a $500 brokerage commission for the purchase. Logan intends to hold this investment for less than a year and classifies it as a Short-Term Investment. The market value of the shares at December 31, 2017, is $58 per share.
-Refer to Table 16-1.On December 31,2017,Downright Corporation declared a $0.50 cash dividend.Logan Corporation should:

Question

Quizplus · Accepted Answer

Logan Corporation should credit Dividend Revenue for $1,000. When a corporation receives a dividend from an investment, it should record the amount as revenue. Therefore, Logan should credit Dividend Revenue for $1,000 to recognize the dividend income. The cash dividend received does not affect the value of the investment, so it does not require an adjustment to Short-Term Investments account.

Table 16-1 On January 2, 2017, Logan Corporation Purchased 2,000 Common Shares