Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

As a long - term investment at the beginning of the 2 0 2 4 fiscal year, Florists International purchased 3 0 % of Nursery

As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 30% of Nursery Supplies Incorporateds 8 million shares of capital stock for $95 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 $1.25 per share. At the end of the year, the fair value of the shares is $90 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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Ramji Balakrishnan, Konduru Sivaramakrishnan, Geoff B. Sprinkle

2nd edition

1118385381, 978-1118385388

More Books

Students also viewed these Accounting questions

Question

Distinguish between a columnar and a formula flexible budget.

Answered: 1 week ago

Question

What do their students end up doing when they graduate?

Answered: 1 week ago

Question

What are types?

Answered: 1 week ago

Question

Why is declaring an array a two-stage process?

Answered: 1 week ago

Question

What is a jagged array?

Answered: 1 week ago