Cash Dividend:
Dividend is the amount that earns the shareholders in
To identify: The correct option.
Explanation:
Option e
The correct option is e
As the M company receive dividend in cash so cash account will increase by $50,000 and cash account will be debited in the books of accounts.
Option a
Credit to investment revenue for $50,000, this is incorrect option, as the company receive dividend in cash so investment revenue account will not credited in the books of accounts.
Option b
Credit to long term investment for $17,500, this is an incorrect option as by credit to long term investment account it means that the balance of long term investment decrease but the company receive dividend in cash so it is incorrect option
Option c
Credit to cash for $17,500, this is incorrect option as company not pay the amount but receive dividend in cash so this is incorrect.
Option d
Debit to long term investment for $17,500; this is an incorrect option as the company will not purchase any long term investment, as debit itself means purchase of investment, so this is incorrect option.
Thus, the correct option is e.
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Chapter C Solutions
Financial and Managerial Accounting: Information for Decisions
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