Question

As a long-term investment at the beginning of the 2021 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 20 million shares for $63 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 $40 million and distributed cash dividends of $1.00 per share. At the end of the year, the fair value of the shares is $59 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, (i.e., 10,000,000 should be entered as 10).)

Answer 1

See the explanation below

Step-by-step explanation:

Share of net income = 30% × $40 million = $12 million

Dividend received = 20 million × $1 = $20 million

The journal are as follows:

Details Dr ($'million) Cr ($'million)

Investment in Nursery Supplies Inc. 63

Cash 63

Being the cash payment for investment in Nursery Supplies Inc.

Investment in Nursery Supplies Inc. 12

Investment income 12

Being the a share of net income of Nursery Supplies Inc.

Cash 20

Investment in Nursery Supplies Inc. 20

Being dividend received from Investment in Nursery Supplies Inc.