Green Services,Inc.invests its excess cash in Creative Technologies,Inc.and acquires 6,000 shares for $61.75 per share.Green Services,Inc.owns less than 2% of Creative's voting stock and plans to hold the stock for two years.While preparing the journal entry to record this transaction,________.

Question

Quizplus · Accepted Answer

The journal entry to record the acquisition of shares as an available-for-sale investment would be to debit Long-term Investments-Available-for-Sale for the cost of the investment, which is $61.75 per share times 6,000 shares, or $370,500. Therefore, option A is the correct choice. Option B is not correct because held-to-maturity investments are usually debt securities, not equity securities like Creative Technologies, Inc.'s stock. Option C is not correct because trading investments are short-term investments, and Green Services, Inc. plans to hold the stock for two years. Option D is not correct because owning less than 2% of voting stock does not qualify the investment as a significant interest investment, which usually requires 20% or more ownership.