Receiving a Stock Dividend from an Available-For-Sale Investment Requires the Following

question 44

Multiple Choice

Receiving a stock dividend from an available-for-sale investment requires the following journal entry:

• A) a debit to Cash and a credit to Dividend Revenue.
• B) a debit to Cash and a credit to Unrealized Gain on Investments.
• C) a debit to Unrealized Gain on Investment and a credit to Dividend Revenue.
• D) no journal entry. Investor makes a memorandum entry in the accounting records.

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Definitions:

Promissory Note

A written, legally binding promise to pay a specified sum of money to a designated person at a specified date or upon demand.

Compounded Semiannually

Interest calculation method that applies the interest to the principal balance and the accumulated interest twice each year.

Simple Annualized Yield

A calculation of investment earnings that does not account for compounding within the year, expressed as an annual rate.

Effective (Annualized) Yield

The effective, or annualized yield, calculates the return on an investment by taking into account the effect of compounding interest over a one-year period.