Lessington Corporation Purchases 4,000 Shares of Gonzalez Company Common Stock

question 103

Multiple Choice

Lessington Corporation purchases 4,000 shares of Gonzalez Company common stock for $150,000 as a long-term investment.The investment is classified as available-for-sale securities.Gonzalez has 500,000 shares of stock currently outstanding and the par value of the stock is $1 per share.Lessington's entry to record the purchase transaction would include a:

• A)Debit to Long-Term Investments-AFS for $150,000.
• B)Credit to Common Stock for $150,000.
• C)Credit Gain on Long-Term Investment $146,000.
• D)Debit to Long-Term Investments-AFS for $4,000.
• E)Credit to Common Stock for $4,000.

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Definitions:

ABC Analysis

An inventory categorization technique that divides items into three categories (A, B, and C) based on their importance and value to the organization.

Annual Demand

The total quantity of a product or service that is expected to be sold or required over the course of a year.

Unit Cost

Unit cost refers to the total expense incurred in producing, storing, and selling one unit of a product, including both fixed and variable costs.

EOQ Model

Economic Order Quantity Model, a formula used in inventory management to determine the optimal order size that minimizes the total cost of inventory.