Question

As a long-term investment at the beginning of the 2018 fiscal year, Florists International purchased 25% of Nursery Supplies Inc.'s 16 million shares for $68 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 $52 million and distributed cash dividends of $.75 per share. At the end of the year, the fair value of the shares is $64 million.Required: Prepare the appropriate journal entries from the purchase through the end of the year.

Answer 1

1. Dr Investment in Nursery supplies common share $68 million

Cr Cash $68 million

2. Dr Investment in Nursery supplies common share $13 million

Cr Investment Revenue $13 million

3.Dr Cash $3 million

Cr Investment in Nursery supplies common share $3 million

4. No Journal entry

Step-by-step explanation:

Preparation of the appropriate journal entries from the purchase through the end of the year.

1. Dr Investment in Nursery supplies common share $68 million

Cr Cash $68 million

2. Dr Investment in Nursery supplies common share $13 million

Cr Investment Revenue $13 million

(25%*$52 million )

3.Dr Cash $3 million

Cr Investment in Nursery supplies common share $3 million

(16 million shares *25%*$.75 per share)

4. No Journal entry is required to record the change in fair value