Chapter 12, Problem 12.20E

Equity method; purchase; investee income; dividends

• LO12-6

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 $56 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 $1.25 per share. At the end of the year, the fair value of the shares is $52 million.

Required:

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