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J.P. Industries purchased 2,000 shares of Yang's common stock for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the stock was $1 per share. J.P. paid $375 in commissions on the transaction. J.P.'s entry to record the purchase transaction would include a_______________.
a. Credit to Common Stock for $2,000.b. Credit to Common Stock for $143,000.c. Credit to Common Stock for $143,375.d. Debit to Long-Term Investments-AFS for $143,000.e. Debit to Long-Term Investments-AFS for $143,375.

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Answer:

Debit: Long-Term Investments-AFS $143,375.

Explanation:

When purchasing the share from Yang the market price of the shares ($143,000) is considered, also the brokerage commission paid ($375) is added as price of the shares. If price per share is calculated it will include the commission.

So total amount ($143,375) is debited from Long-Term Investments as shares are long term investments.

The credit entry will be to cash for the purchase amount.

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