J.P.Industries purchased Yang Corporation bonds with a par value of $143,000 for $143,375 as a long-term investment,which included $375 in brokerage fees.The investment is classified as available-for-sale securities.J.P.'s entry to record the purchase transaction would include a:
A)Debit to Brokerage Fees Expense,$375.
B)Credit to Debt Investments-AFS for $143,000.
C)Credit to Debt Investments-AFS for $143,375.
D)Debit to Debt Investments-AFS for $143,000.
E)Debit to Debt Investments-AFS for $143,375.

Question

Quizplus · Accepted Answer

J.P. Industries purchased the Yang Corporation bonds for $143,375, which includes $375 in brokerage fees. Since the investment is classified as available-for-sale securities, the entry to record the purchase transaction would include a debit to Debt Investments-AFS for $143,375 (the total cost of the investment including fees). Therefore, choice E is the correct answer. Choice A is incorrect because the brokerage fees are not expensed separately, but rather included in the cost of the investment. Choice B is incorrect because it only records the par value of the bond, and not the total cost including fees. Choice C is incorrect because it credits the total cost of the investment to a separate account, rather than debiting it to the investment account. Choice D is incorrect because it only records the par value of the bond, and not the total cost including fees.

JPIndustries Purchased Yang Corporation Bonds with a Par Value of $143,000