Morgan Company purchased 2,000 shares of Asta's ordinary shares for $143,000 as a long-term investment. The investment is classified as available-for-sale securities. The par value of the shares was $1 per share. The entry to record the transaction would include a:

A) Credit to Share Capital-Ordinary for $2,000.
B) Credit to Share Capital-Ordinary for $143,000.
C) Credit to Share Capital-Ordinary for $71.50.
D) Debit to Long-Term Investments-AFS for $2,000.
E) Debit to Long-Term Investments-AFS for $143,000.

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Mejda Dakhlaoui · Accepted Answer

Final Answer : E, Explanation :  When Morgan Company purchases shares of another company (Asta) as a long-term investment classified as available-for-sale securities, the entry to record the transaction would include a debit to the Long-Term Investments-AFS account for the cost of the purchase, which is $143,000. The par value of the shares and the classification of the shares as ordinary do not impact the initial recording of the investment in the accounting records of the purchasing company.

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