Fizer Pharmaceutical paid $78 million on January 2, 2018, for 6 million shares o
ID: 2532590 • Letter: F
Question
Fizer Pharmaceutical paid $78 million on January 2, 2018, for 6 million shares of Carne Cosmetics common stock. The investment represents a 25% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne’s operations. Fizer received dividends of $2 per share on December 21, 2018, and Carne reported net income of $28 million for the year ended December 31, 2018. The fair value of Carne’s common stock at December 31, 2018, was $28.50 per share.
The book value of Carne's net assets was $192 million.
The fair value of Carne's depreciable assets exceeded their book value by $48 million. These assets had an average remaining useful life of twelve years.
The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.
Required:
Complete the table below and prepare the appropriate journal entries related to the investment during 2018.
Journal Entries. For the 4th Entry*********What should I put there? -To record Depreciation Adjustment?
(millions) Investee Net Assets x Ownership Interest % Net Assets Purchased Difference Is Attributable to Purchase Price 78 M Fair Value Carne's Assets Book Value Carne's Assets Depreciation Adjustment Years Adjustment Investment Revenue /(divide byExplanation / Answer
Solution:
Completing the table below and Preparing the appropriate journal entries related to the investment during 2018:
Preparing the Journal Entries for the following:
($ in millions) Investee Net Assets x Ownership Interest Net Assets Purchased Difference Attributable To Purchase Price 78 Fair Value Carne's Assets 240 * 25% 60 18 Depreciable Asset Book Value Value Carne's Assets 192 * 25% 48 30 Goodwill Depreciation Adjustment Amount/ Years Adjustment Undervaluation of assets 48/ 12 4Related Questions
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