Aurum Services,Inc.acquired 100,000 shares of Gamma Metals,Inc.on January 1,2017.Gamma pays a cash dividend of $0.25 per share on March 2,2017.With the current investment,Aurum Services,Inc.holds 8% of Gamma.In the journal entry on March 2,2017,________.

Question

Quizplus · Accepted Answer

When a company receives cash dividends from an investment in equity securities, it should record the receipt of the dividend by crediting Dividend Revenue. The Long-term Investments account should not be debited because there is no change in the value of the investment. The gain or loss on the investment would be recognized through a change in the fair value of the investment, which is not applicable in this case as there is no information on the fair value of Gamma Metals, Inc.