Vans purchased 40,000 shares of Skechs ordinary shares for $232,000. This represents 40% of the outstanding shares. The entry to record the transaction includes a:

Question

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The entry to record the purchase of 40,000 shares of Skechs ordinary shares for $232,000 would be to debit Long-Term Investments for the full amount of $232,000, since this is a long-term investment made by Vans. There is no information indicating that this investment is being held for trading or is classified as held-to-maturity or available-for-sale, so options D and E can be eliminated. Option A is incorrect because the amount of the investment is not calculated as a percentage of the outstanding shares, but rather as a dollar amount. Option C is also incorrect because it would result in a decrease in Long-Term Investments, which is incorrect since Vans is investing in the shares.

Vans Purchased 40,000 Shares of Skechs Ordinary Shares for $232,000