Fizer Pharmaceutical paid $86 million on January 2, 2021, 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 $1 per share on December 21, 2021, and Carne reported net income of $32 million for the year ended December 31, 2021. The fair value of Carne’s common stock at December 31, 2021, was $36.50 per share.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Fizer Pharmaceutical paid $86 million on January 2, 2021, 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 $1 per share on December 21, 2021, and Carne reported net income of $32 million for the year ended December 31, 2021. The fair value of Carne’s common stock at December 31, 2021, was $36.50 per share.
 

  • The book value of Carne's net assets was $184 million.
  • The fair value of Carne's depreciable assets exceeded their book value by $40 million. These assets had an average remaining useful life of ten years.
  • The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.

Complete the table below. (Enter your answers in millions, (i.e., 10,000,000 should be entered as 10)).

 
 
 
 
($ in millions) Investee Net Assets   Ownership Interest     Net Assets Purchased Difference Attributable to:
Purchase Price     $86    
Fair Value Carne's assets   x   % =      
Book Value Carne's assets   x   % =      
                 
Depreciation adjustment:     Years     Adjustment    
Investment revenue   /     =    
 
 
 
1, Record the investment in Carne cosmetics shares

2. record the investors share of net income 

3. record cash dividends

4. record the depreciation adjustment 

5. record the fair value adjustment at year end

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