Use the Following Information to Answer Questions

question 4

Multiple Choice

Use the following information to answer questions
Heart Company has a total of 750,000 shares issued.Diamonds Inc.purchases 150,000 of Heart shares for $10 \ share on January 1, 2011.On December 31, 2011, Heart has a net income of $125,000 and Heart shares are trading for $9.50 \ share.
-If this is a strategic investment, Diamond must making the following entry on December 31:

• A)dr.Investment in shares, cr.OCI
• B)dr.OCI, cr.Investment in shares
• C)dr.Cash, cr.Investment in shares
• D)dr.Investment in shares, cr.Equity in Earnings of Investee

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Definitions:

Incorporation Process

The legal procedure by which a business entity is formed as a corporation, involving registration with the state, drafting articles of incorporation, and meeting other regulatory requirements.

Capital

Financial assets or the financial value of assets, such as cash or goods, used by a company to fund its operations and facilitate its growth.

Double Taxation

The imposition of tax by two or more jurisdictions on the same declared income, asset, or financial transaction.

S Corporation

A type of corporation in the United States that elects to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code, allowing profits to be passed directly to shareholders and avoid double taxation.