Power Generation Corp

question 79

Multiple Choice

Power Generation Corp. owns 38% of Electric Limited. Net income for Electric Limited for the year ending December 31, 2014, is $450,000. The journal entry prepared by Power Generation Corp. on December 31, 2014, includes a:

• A) debit to Cash for $171,000
• B) credit to Long-Term Investment for $171,000
• C) debit to Long-Term Investment for $450,000
• D) debit to Long-Term Investment for $171,000

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Definitions:

Common Shares

Equity securities representing ownership in a corporation, providing voting rights, and entitling holders to a share of the company’s success through dividends and/or capital appreciation.

Agency Approach

A mechanism used in financial management where one party (the agent) is allowed to act on behalf of another (the principal) in financial transactions or decisions.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation.

Unamortized Premium

The portion of a bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.