31) Purdue Company had the following transactions pertaining to stock investment

Question

31) Purdue Company had the following transactions pertaining to stock investments: 31) a. February 1: Purchased 310° shares of Hudson Company (10% ownership) at the market price of $17 per share. Purdue Company intends to keep the stock for more than one year and classifies the stock as available-for-sale b. June 1: Received cash dividends of $7000 on Hudson Company stock c. October 1: Sold 3100 shares of Hudson stock for $55,800. The journal entry to record the purchase of the Hudson stock is: A) debit Cash for $52,700 and credit Common Stock for $52,700. B) debit Common Stock for $52,700 and credit Cash for $52,700. C) debit Equity-Method Investment for $52,700 and credit Cash for $52,700. D) debit Investment in Available-for-Sale Securities for $52,700 and credit Cash for $52,700.

Explanation / Answer

31) since the ownerhip is less than 20% , equity method is not used so the correct answer is option d .Also it is an investment hence option a and b are wrong debit Investment in Available -for-Sale Securities for $52,700 and credit cash for $52,700 47) Account titles Debit Credit Long-term notes payable 60,000 Accounts receivable 30,000 accounts payable 39,000 building 57,000 Cash and cash Equivalents 84,000 Common stock 123,000 interest payable 1500 land 43,000 short term investments 7,000 income taxes payable 13,000 Equipment 64,500 supplies 5,000 Retained earnings(balancing figure) 54,000 total 290,500 54,000 option B is the correct answer

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