Fizer Pharmaceutical paid $68 million on January 2, 2016, for 4 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, 2016, and Carne reported net income of $40 million for the year ended December 31, 2016. The fair value of Carne’s common stock at December 31, 2016, was $18.50 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 $32 million. These assets had an average remaining useful life of eight 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: Prepare all appropriate journal entries related to the investment during 2016.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Fizer Pharmaceutical paid $68 million on January 2, 2016, for 4 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, 2016, and Carne reported net income of $40 million for the year ended December 31, 2016. The fair value of Carne’s common stock at December 31, 2016, was $18.50 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 $32 million. These assets had an average remaining useful life of eight 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: Prepare all appropriate journal entries related to the investment during 2016.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

Blurred answer
Knowledge Booster
Consolidations
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education