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Required: 1. How would this investment be classified on Florists' balance sheet? 2. Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. 3. Indicate the effect of this investment on 2024 income before taxes.

Required: 1. How would this investment be classified on Florists' balance sheet? 2. Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. 3. Indicate the effect of this investment on 2024 income before taxes.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 8 million shares of capital stock for $40 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 to measure the investment at fair value. During the year, Nursery Supplies reported net income of $20 million and distributed cash dividends of $ 1.00 per share. At the end of the year, the fair value of the shares is $36 million. Required: How would this investment be classified on Florists' balance sheet? Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. Indicate the effect of this investment on 2024 income before taxes. As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 8 million shares of capital stock for $40 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 to measure the investment at fair value. During the year, Nursery Supplies reported net income of $20 million and distributed cash dividends of $1.00 per share. At the end of the year, the fair value of the shares is $36 million. Required: 1. How would this investment be classified on Florists' balance sheet? 2. Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. 3. Indicate the effect of this investment on 2024 income before taxes.
Transcribed Image Text:As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 8 million shares of capital stock for $40 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 to measure the investment at fair value. During the year, Nursery Supplies reported net income of $20 million and distributed cash dividends of $ 1.00 per share. At the end of the year, the fair value of the shares is $36 million. Required: How would this investment be classified on Florists' balance sheet? Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. Indicate the effect of this investment on 2024 income before taxes. As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 8 million shares of capital stock for $40 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 to measure the investment at fair value. During the year, Nursery Supplies reported net income of $20 million and distributed cash dividends of $1.00 per share. At the end of the year, the fair value of the shares is $36 million. Required: 1. How would this investment be classified on Florists' balance sheet? 2. Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. 3. Indicate the effect of this investment on 2024 income before taxes.
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