Loreal-American Corporation purchased several marketable securities during 2021. At December 31, 2021, the company had the...

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Loreal-American Corporation purchased several marketable securities during 2021. At December 31, 2021, the company had the in

On March 31, 2021, Chow Brothers, Inc., bought 8% of KT Manufacturings capital stock for $52.4 million. KTs net income for

As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 25% of Nursery Supplies

Complete all three parts (Loreal-American Corporation, Chow Brothers Inc., and Florists International)

business accounting

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Answer 1

Answer #1

	Part 1.
	Loreal American Corp.
	Ans a.
	As the securities are treated as available for sale, the FV gain and loss
	will be passed through OCI.

	Journal Entry
Sr No	Account Title	Dr $	Cr $
1	Unrealized Loss in Abailable for Sale Security(OCI)	117,000
	Investment in Avaialble for Sale Security (Blair Inc)		117,000

2	Investment in Avaialble for Sale Security (ANC Corp)	44,000
	Unrealized Gain in Abailable for Sale Security(OCI)		44,000

3	Investment in Avaialble for Sale Security (Drake Corp)	66,000
	Unrealized Gain in Abailable for Sale Security(OCI)		66,000

4	Unrealized Loss in Abailable for Sale Security(OCI)	32,000
	Investment in Avaialble for Sale Security (Aaron Ind.)		32,000

Ans b.
As the fair value adjustments are passed through Unrealizes Gain and Loss account
in Other Comprehensive Income , no amount will be reported in Income Statement.

Part 2.
Chow Brothers.
Fair Value of the trading securities fell at Dec 31,21 to	$36.6 Million
Purchase cost of the Trading securities	$52.4 Million
Unrealized Loss	$ 15.80	Million

	Ans 1. Journal entries
	Journal Entry
Date	Account Title	Dr $	Cr $
Mar 31.21	Investment in Trading Securities-KT Mfg	52,400,000
	Cash		52,400,000

Dec 31.21.	Unrealized Loss in Investment in Trading Securities	15,800,000
	Investment in Trading Securities-KT Mfg		15,800,000

Ans 2.
FV of KTM Investment on Dec 31,2021	$36.6 Million
Sale value of investment on Jan 20,22	$30.8 Million
Realized Loss on sale of investment	$5.8 Million

	Journal Entry
	Journal Entry
Date	Account Title	Dr $	Cr $
Jan 20,22	Cash	30,800,000
	Loss on Investment in Trading Securities	5,800,000
	Investment in Trading Securities-KT Mfg		36,600,000

Part 3.
Florist International
Florist International's holding in Nursery Supplies Inc is 25% , so it indicates
significant influence on investee and the investment will be treated by
Equity Investment method.
Florist International purchased 25% of 16 million shares=4 Million shares of Nursery
Supplies Inc.
Dividend Received by Florist Intl in the year @$0.75/share =4M*0.75=		$ 3,000,000
Florist Intl's 25% share of 2021 Nursery Suppl Inc Net Income $52M=		$ 13,000,000

	Journal Entry
Sr No	Account Title	Dr $	Cr $
1	Investment in Nursery Supplies Inc .	68,000,000
	Cash		68,000,000
	purchase of investment
2	Investment in Nursery Supplies Inc .	13,000,000
	Income from Investment		13,000,000
	Share of net Income
3	Cash	3,000,000
	Investment in Nursery Supplies Inc .		3,000,000
	Dividend received

	There is no fair value adjustment for Equity Investment.

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