Question

On September 15, Jerome, Inc., paid $8,900 to make a long-term investment in available-for-sale securities by purchasing notes of Topper, Inc.

Complete the necessary journal entry.

Answer 1

Date Account Title Debit Credit

Sept. 15 Investment in Available For Sale $8,900

Security

Cash $8,900

Cash will be credited to recognize that it reduced on account of it being used to pay for the investment. The investment will be treated as an asset so it will be debited to recognize that it is an increase.

Answer 2

Answer and Explanation:

The journal entry is shown below:

Long term investment - AFS $8,900

To Cash $8,900

(Being cash paid is recorded)

here long term investment is debited as it increased the assets and credited the cash as it decreased the assets