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Common Stock Holdings-Blue Investments, Inc. Cash Equity Investments-Blue Investments, Inc. Cash Cash Equity Investments-Blue Investments, Inc. 2,050,000 2,050,000 2,050,000 2,050,000 2,050,000 2,050,000

Common Stock Holdings-Blue Investments, Inc. Cash Equity Investments-Blue Investments, Inc. Cash Cash Equity Investments-Blue Investments, Inc. 2,050,000 2,050,000 2,050,000 2,050,000 2,050,000 2,050,000

FINANCIAL ACCOUNTING
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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**Transaction Analysis for Premier Services, Inc.** **Scenario:** Premier Services, Inc. pays $2,050,000 to acquire 38% of the voting stock of Blue Investments, Inc. on March 5, 2025. Determine the correct journal entry for this transaction. **Journal Entry Options:** 1. **Option A:** - **Debit**: Cash $2,050,000 - **Credit**: Revenue from Investments $2,050,000 2. **Option B:** - **Debit**: Common Stock Holdings—Blue Investments, Inc. $2,050,000 - **Credit**: Cash $2,050,000 3. **Option C:** - **Debit**: Equity Investments—Blue Investments, Inc. $2,050,000 - **Credit**: Cash $2,050,000 4. **Option D:** - **Debit**: Cash $2,050,000 - **Credit**: Equity Investments—Blue Investments, Inc. $2,050,000 **Explanation:** This problem requires recording an acquisition of stock, where Premier Services, Inc. is purchasing a significant portion of Blue Investments, Inc. The correct entry must reflect the investment made and the outflow of cash. In such scenarios, usually "Equity Investments" is debited for the amount of the purchase to show an increase in investment assets, while "Cash" is credited to reflect the decrease in cash due to the payment made.
Transcribed Image Text:**Transaction Analysis for Premier Services, Inc.** **Scenario:** Premier Services, Inc. pays $2,050,000 to acquire 38% of the voting stock of Blue Investments, Inc. on March 5, 2025. Determine the correct journal entry for this transaction. **Journal Entry Options:** 1. **Option A:** - **Debit**: Cash $2,050,000 - **Credit**: Revenue from Investments $2,050,000 2. **Option B:** - **Debit**: Common Stock Holdings—Blue Investments, Inc. $2,050,000 - **Credit**: Cash $2,050,000 3. **Option C:** - **Debit**: Equity Investments—Blue Investments, Inc. $2,050,000 - **Credit**: Cash $2,050,000 4. **Option D:** - **Debit**: Cash $2,050,000 - **Credit**: Equity Investments—Blue Investments, Inc. $2,050,000 **Explanation:** This problem requires recording an acquisition of stock, where Premier Services, Inc. is purchasing a significant portion of Blue Investments, Inc. The correct entry must reflect the investment made and the outflow of cash. In such scenarios, usually "Equity Investments" is debited for the amount of the purchase to show an increase in investment assets, while "Cash" is credited to reflect the decrease in cash due to the payment made.
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