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18 March, 14:22

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 year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (i. e., 10,000,000 should be entered as 10).)

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  1. 18 March, 14:27
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    See the explanation below

    Explanation:

    Share of net income = 30% * $40 million = $12 million

    Dividend received = 20 million * $1 = $20 million

    The journal are as follows:

    Details Dr ($'million) Cr ($'million)

    Investment in Nursery Supplies Inc. 63

    Cash 63

    Being the cash payment for investment in Nursery Supplies Inc.

    Investment in Nursery Supplies Inc. 12

    Investment income 12

    Being the a share of net income of Nursery Supplies Inc.

    Cash 20

    Investment in Nursery Supplies Inc. 20

    Being dividend received from Investment in Nursery Supplies Inc.
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