At the beginning of the year,Joan Steel,Inc.purchased 10,000 shares of Smith Metals,Inc.for $34,000 in exchange for cash and now holds 3.2% of the voting stock of Smith Metals,Inc.The management of Joan Steel intends to hold this stock for two years.Assuming no other transaction happened during the year,the ________ in the balance sheet will increase.

Question

Quizplus · Accepted Answer

The purchase of 10,000 shares of Smith Metals, Inc. for $34,000 represents a long-term investment for Joan Steel, Inc. As the management intends to hold this stock for two years and assuming no other transaction has taken place during the year, the balance of long-term investments in the balance sheet will increase. This is because the value of the investment will remain the same, regardless of any changes in the market or the performance of the company. Therefore, the correct answer is A) long-term investments.

At the Beginning of the Year,Joan Steel,Inc