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As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 30%...

As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 10 million shares for $76 million. The fair value and book value of the shares were the same at that time. During the year, Nursery Supplies earned net income of $60 million and distributed cash dividends of $2.00 per share. At the end of the year, the fair value of the shares is $72 million.

Required:
Prepare the appropriate journal entries from the purchase through the end of the year.

1. Record the investment in Nursery Supplies shares.

2. Record the investor's share of net income.

3. Record the cash dividends received from Nursery Supplies shares.

4. Record fair value adjustment at year-end.

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Answer #1

Answer:

Date Particulars Debit ($) in million Credit ($) in million
Investment in Nursery supplies 76
Cash 76
(To record purchase of 30% shares for $76 million)
Investment in Nursery supplies ($60 million x 30%) 18
Investment Revenue 18
(To record investor share of investee's net income)
Cash (10 million shares x 30% share x $2 per share) 6
Investment in Nursery supplies 6
(To record receipt of dividend)
No Entry
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