6 Fizer Pharmaceutical paid $82 million on January 2, 2018, for 2 million shares

Question

6 Fizer Pharmaceutical paid $82 million on January 2, 2018, for 2 million shares of Carne Cosmetics common stock. The investment represents a 20% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne's operations Fizer received dividends of $1 per share on December 21, 2018, and Carne reported net income of $45 million for the year ended December 31, 2018. The fair value of Cane's common stock at December 31. 2018, was $32.50 per share. 10 points 2 025419 The book value of Carne's net ossets wes $210 million. The fair value of Carne's depreciable assets exceeded their book value by $35 million. These assets had an average remaining useful life of seven years The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. elook Required: uferencesComplete the table below and prepare the appropriate journal entries related to the investment during 2018. Complete this question by entering your answers in the tabs below. General Caloulation Sournal Compiete the table below. (Enter your answers in millions, [Le, 10,000,000 should be entered as 10)). Investee ownership Purchased Assets Interest Purchase Price Fair Value Carne's assets Bosk Value Carne's assets 82

Explanation / Answer

Compute the undervaluation of Asset as follows ( InMillion) Investee Net Asset OwnerShip Interest = Net Asset Purchased Difference Attributable to Purchase Price $82.00 Fair Value of C Asset ($210+$35) $245.00 X 20% = $49.00 ($82-$49)=$33 Goodwill Book Value of C Asset $210.00 X 20% = $42.00 ($49-$42)=$7 Undervaluation of Asset Journal Entry in the Books of Fizer Pharmaceutical ( in Million) Account Desription , Title Debit Credit Investment in Carne Cosmetic $82.00 Cash $82.00 ( To record Purchase of Investment) Investment in Carne Cosmetic $9.00 Investment Revenue( $45*20%) $9.00 ( To record share of income) Cash (2million Shares *$1) $2.00 Investment in Carne Cosmetic $2.00 ( To record Dividend received) Investment Revenue ($7million /7 Year) $1.00 Investment in Carne Cosmetic $1.00 (To Record depreciation adjustment for Undervaluation )

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