Beige Corporation pays $516,000 to acquire 42% of the equity securities of Olive Technologies,Inc.on May 5,2017.In the journal entry to record this transaction ________.

Question

Quizplus · Accepted Answer

When purchasing equity securities in another company, the journal entry should include a debit to the Long-term Investments account representing the cost of the investment. In this case, since the equity securities were acquired for investment purposes rather than for trading or available-for-sale, the Long-term Investments account should be specifically identified as being related to the investment in Olive Technologies, Inc. Therefore, the correct entry is to debit Long-term Investments-Olive Technologies, Inc. for $516,000.

Beige Corporation Pays $516,000 to Acquire 42% of the Equity