Green Services,Inc.invests its excess cash in Creative Technologies,Inc.and acquires 1,000 shares for $53.75 per share.Green Services,Inc.owns less than 1% 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

Based on the given scenario, the best choice for the journal entry would be to debit Long-term Investments-Available-for-Sale for the cost of the investment, which is $53,750 (1,000 shares x $53.75 per share). This is because Green Services, Inc. plans to hold the stock for two years, which indicates that it is an available-for-sale security according to the accounting standards. The other options are not applicable in this scenario because Green Services, Inc. does not have a significant interest in Creative Technologies, Inc. nor does it intend to hold the stock to maturity or for trading purposes.