As a long-term investment at the beginning of the 2018 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 8 million shares for $30 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment typically would be accounted for under the equity method, but instead chooses the fair value option. During the year, Nursery Supplies earned net income of $30 million and distributed cash dividends of $1.25 per share. At the end of the year, the fair value of the shares is $25 million. Required: 1. How would this investment be classified on Florists' balance sheet? 2. Prepare all appropriate journal entries related to the investment during 2018.
As a long-term investment at the beginning of the 2018 fiscal year, Florists International purchased 30% of Nursery Supplies Inc.'s 8 million shares for $30 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment typically would be accounted for under the equity method, but instead chooses the fair value option. During the year, Nursery Supplies earned net income of $30 million and distributed cash dividends of $1.25 per share. At the end of the year, the fair value of the shares is $25 million. Required: 1. How would this investment be classified on Florists' balance sheet? 2. Prepare all appropriate journal entries related to the investment during 2018.
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:As a long-term investment at the beginning of the 2018 fiscal year, Florists International
purchased 30% of Nursery Supplies Inc.'s 8 million shares for $30 million. The fair value and
book value of the shares were the same at that time. The company realizes that this
investment typically would be accounted for under the equity method, but instead chooses
the fair value option. During the year, Nursery Supplies earned net income of $30 million and
distributed cash dividends of $1.25 per share. At the end of the year, the fair value of the
shares is $25 million.
Required: 1. How would this investment be classified on Florists' balance sheet?
2. Prepare all appropriate journal entries related to the investment during 2018.
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