Question

At the beginning of the​ year, wilson​ steel, inc. purchased​ 10,000 shares of barnes​ metals, inc. for​ $34,000 in exchange for cash and now holds​ 3.2% of the voting stock of barnes​ metals, inc. the management of wilson steel intends to hold this stock for two years. assuming no other transaction happened during the​ year, the​ ________ in the balance sheet will increase.

Answer 1

Answer: Long-term investments

Wilson Steel paid $34,000 for a 3.2% stake in Barnes Metal.

Wilson Steel has invested in Barnes with the intention of selling this stock after two years. It has no other business interest in it. Hence, we can consider this as a long-term investment.

Long-term investments are a part of the assets of a company. Hence, in the balance sheet, long-term assets will show an increase of $34,000.