1) Michelo Corporation invested $100,000 to acquire 20,000 shares of Vatsala Tec
ID: 2710745 • Letter: 1
Question
1) Michelo Corporation invested $100,000 to acquire 20,000 shares of Vatsala Technologies on March 1, 2015. On June 3, 2015, Vatsala pays a cash dividend of $0.25 per share. The investment is classified as an available-for-sale investment. How would Michelo record this transaction of June 3 on its books?
A)
Cash
5,000
Long-term Investments—Trading Investments
5,000
B)
Cash
5,000
Long-term Investments—Available-for-Sale
5,000
C)
Cash
5,000
Long-term Investments—Held-to-Maturity
5,000
D)
Cash
5,000
Dividend Revenue
5,000
2) What is the effect of receiving a dividend payment on investments classified as available for sale:
A) the total assets will remain unaffected.
B) the long-term assets will decrease.
C) Increase in total Equity .
D) decrease in total liabilities
Cash
5,000
Long-term Investments—Trading Investments
5,000
Explanation / Answer
1.
D)
Cash
5,000
Dividend Revenue
5,000
in the case of available for sale securities dividens recived treated as income
Cash
5,000
Dividend Revenue
5,000
in the case of available for sale securities dividens recived treated as income
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