Fizer Pharmaceutical paid $68 million on January 2, 2011, for 4 million shares of Carne Cosmetics common

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Fizer Pharmaceutical paid $68 million on January 2, 2011, 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, 2011, and Carne reported net income of $40 million for the year ended December 31, 2011. The fair value of Carne's common stock at December 31, 2011, 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 2011.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Intermediate Accounting

ISBN: 978-0077400163

6th edition

Authors: J. David Spiceland, James Sepe, Mark Nelson

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