If Posthorn Corporation Accounts for Its Investment in Stamp Company

question 51

Multiple Choice

If Posthorn Corporation accounts for its investment in Stamp Company using the cost method, what entry will the company make to record the dividends received from Stamp Company for 2016?

• A)
• \[\begin{array} { | l | l | l | }
• \hline & \text { Debit } & \text { Credit } \\
• \hline \text { Cash } & \$ 16,000 & \\
• \hline \text { Dividend Income } & & \$ 16,000 \\
• \hline
• \end{array}\]
• B)
• \[\begin{array} { | l | l | l | }
• \hline & \text { Debit } & \text { Credit } \\
• \hline \text { Cash } & \$ 16,000 & \\
• \hline \text { Investment in Stamp Company } & & \$ 16,000 \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | l | l | }
• \hline & \text { Debit } & \text { Credit } \\
• \hline \text { Investment in Stamp Company } & \$ 16,000 & \\
• \hline \text { Dividend Income } & & \$ 16,000 \\
• \hline
• \end{array}\]
• D)No entry requireD.

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Definitions:

Accounting

The process of recording, classifying, summarizing, and interpreting financial transactions and events to provide relevant information for decision-making.

Journalize

Refers to the process of recording business transactions in the journal as part of the accounting cycle.

Reporting Period

The span of time covered by the financial statements of a business.

General Journal

A primary accounting record used to document all business transactions in chronological order.