### Recording Stock Investments with Insignificant InfluenceWhen a company pays cash to acquire stock investments with insignificant influence, the correct journal entry is essential for accurate financial accounting and reporting.**Scenario:**A company paid $37,800 cash to acquire stock investments with insignificant influence.**Question:**What is the correct journal entry to record the purchase of this investment?**Multiple Choice Options:**1. **Option A:** - **Debit:** Stock Investments $37,800 - **Credit:** Cash $37,8002. **Option B:** - **Debit:** Cash $37,800 - **Credit:** Consolidation Method Investments $37,8003. **Option C:** - **Debit:** Cash $37,800 - **Credit:** Equity Method Investments $37,8004. **Option D:** - **Debit:** Equity Method Investments $37,800 - **Credit:** Cash $37,8005. **Option E:** - **Debit:** Stock Investments $37,800 - **Credit:** Equity Method Investments $37,800### Explanation:To accurately record the purchase of stock investments with insignificant influence, the correct journal entry involves debiting the Stock Investments account and crediting the Cash account, reflecting the outflow of cash for the investment.**Correct Answer:**- Option A: Debit Stock Investments $37,800; credit Cash $37,800.This entry increases the Stock Investments account, representing the acquisition of the investment, and decreases the Cash account, reflecting the payment made.

Significant influence means that the investor has the ability to participate in financial and…

A company paid $37,800 cash to acquire stock investments with insignificant influence. The correct entry to record the purchase of the investment is: Multiple Choice Debit Stock Investments $37,800; credit Cash $37,800. Debit Cash $37,800; credit Consolidation Method Investments $37,800. Debit Cash $37,800; credit Equity Method Investments $37,800. Debit Equity Method Investments $37,800;credit Cash $37,800. Debit Stock Investments $37,800; credit Equity Method Investments $37,800. O O O

A company paid $37,800 cash to acquire stock investments with insignificant influence. The correct entry to record the purchase of the investment is: Multiple Choice Debit Stock Investments $37,800; credit Cash $37,800. Debit Cash $37,800; credit Consolidation Method Investments $37,800. Debit Cash $37,800; credit Equity Method Investments $37,800. Debit Equity Method Investments $37,800;credit Cash $37,800. Debit Stock Investments $37,800; credit Equity Method Investments $37,800. O O O

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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