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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 yea

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Answer:

1. Dr Investment in Nursery supplies $63million

Cr Cash $63million

2. Dr Investment in Nursery supplies $12million

Cr Investment Revenue $12million

3. Dr Cash $6million

Cr Investment in Nursery supplies $6million

4. No Entry

Explanation:

Preparation of the appropriate journal entries from the purchase through the end of the yea

1. Preparation of the journal entry to Record the investment in Nursery Supplies shares.

Dr Investment in Nursery supplies $63million

Cr Cash $63million

(Being To record purchase of 30% shares for $63 million)

2. Preparation of the journal entry to Record the investor's share of net income

Dr Investment in Nursery supplies ($40 million x 30%) $12million

Cr Investment Revenue $12million

(Being To record investor share of investee's net income)

3. Preparation of the journal entry to Record the cash dividends received from Nursery Supplies shares.

Dr Cash (20 million shares x 30% share x $1 per share) $6million

Cr Investment in Nursery supplies $6million

(Being To record receipt of dividend)

4. Preparation of the journal entry to Record fair value adjustment at year-end.

No Entry

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