Fizer Pharmaceutical paid $78
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 $2
per share on December 21, 2021, and Carne reported net income of
$28 million for the year ended December 31, 2021. The fair value of
Carne’s common stock at December 31, 2021, 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
$48 million. These assets had an average remaining useful life of
twelve years. The remainder of the excess of the cost of the
investment over the book value of net assets purchased was
attributable to goodwill. Required: Complete the table below and
prepare the appropriate journal entries related to the investment
during 2021. (Record the investment in Carne Cosmetics shares,
Record the investor's share of net income, Record the cash
dividends, Record the depreciation adjustment, Record the fair
value adjustment at year-end)
Homework Answers
|
($ in millions) |
Investee Net Assets |
Ownership Interest |
Net Assets Purchased |
Difference |
Attributable to: |
|||
|
Cost |
78 |
|||||||
|
Fair Value Cameron's assets |
240 |
x |
25 |
% |
= |
60 |
$18 |
Goodwill |
|
Book Value Cameron's assets |
192 |
x |
25 |
% |
= |
48 |
$12 |
Undervaluation of assets |
|
Depreciation adjustment: |
Years |
Adjustment |
||||||
|
Investment revenue |
$12 |
/ |
12 |
= |
$1 |
192+48 =240
|
No. |
General journal |
Debit |
Credit |
|
1 |
Purchase |
||
|
Investment in Carne Cosmetics shares |
78 |
||
|
Cash |
78 |
||
|
2 |
Net income |
||
|
Investment in Carne Cosmetics shares (28*25%) |
7 |
||
|
Investment Revenue |
7 |
||
|
3 |
Dividends |
||
|
Cash (6*2*25%) |
3 |
||
|
Investment in Carne Cosmetics shares |
3 |
||
|
4 |
Depreciation |
||
|
Investment Revenue |
1 |
||
|
Investment in Carne Cosmetics shares |
1 |
||
|
5 |
Goodwill |
||
|
Investment Revenue (18/15) |
1.2 |
||
|
Investment in Carne Cosmetics shares |
1.2 |
Add Answer to:
Fizer Pharmaceutical paid $78
million on January 2, 2021, for 6 million shares of Carne Cosmetics...
Fizer Pharmaceutical paid $78 million on January 2, 2021, for 6 million shares of Carne Cosmetics...
Fizer Pharmaceutical paid $78 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 $2 per share on December 21, 2021, and Carne reported net income of $28 million for the year ended December 31, 2021. The fair value of Carne’s common stock at December 31, 2021, was...
Exercise 12-22 (Algo) Equity method; adjustment for depreciation [LO12-6, 12-7] Fizer Pharmaceutical paid $85 million on...
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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 $3 per share on December
21, 2021, and Carne reported net income of $35 million for the year
ended December 31, 2021. The fair...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE. THANK YOU! Exercise 12-22 (Algo) Equity...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
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Exercise 12-22 (Algo) Equity method; adjustment for depreciation
[LO12-6, 12-7]
Fizer Pharmaceutical paid $85 million on January 2, 2021, for 5
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 $3 per share on December
21, 2021, and Carne reported net income of $35 million for the year
ended December 31, 2021. The fair...
PLEASE PUT SOLUTION IN THE SAME FORMAT AS THE IMAGE.
THANK YOU!
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