Question

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Exercise 12-20 (Algo) Equity method; purchase; Investee Income; dividends (LO12-6) As a long-term Investment at the beginning of the 2021 fiscal year, Florists International purchased 25% of Nursery Supplies Inc.'s 8 million shares for $62 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 $48 million and distributed cash dividends of $2.50 per share. At the end of the year, the fair value of the shares is $58 million. Required: Prepare the appropriate journal entries from the purchase through the end of the year. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in millions. (1.e., 10.000.000 should be entered as 10).) View transaction list Journal entry worksheet Record the investment in Nursery Supplies shares. Note: Enter debits before credits Transactions General Journal Debit Credit Record entry Clear entry View general Journal

Answer 1

Solution:

Journal Entries - Florists International (In milions)
Transaction	Particulars	Debit	Credit
1	Investment in Nursery Supplies Inc Dr	$62.00
	To Cash		$62.00
	(To record investment in Nursery supplies)
2	Investment in Nursery Supplies Inc Dr	$12.00
	To Investment Income ($48*25%)		$12.00
	(To record share of income in Nursery)
3	Cash Dr (2*$2.50)	$5.00
	To Investment in Sheridan		$5.00
	(To record dividend received)
4	No Journal Entry Required