please explain the calculations briefly

On January 1, 2016, Hossain Inc. acquired a 25% stake in Smith Inc. The following is the data for Smith on the date of the acquisition, and Smith's results for 2016. Book value of Smith's assets at acquisition Fair value of Smith's assets at acquisition Excess of fair value over book value of assets at acquisition Agerage remaining useful life of Smith's assets 160 185 25 8 Percentage of ownership acquired 25.00% Number of shares acquired (in millins) Total cost of investment ($m) 4 62 Results for Smith for 2015 Net Income ($m) Dividend per share ($) 32 0.8 Requirements: 1) Show how Hossain Inc. would record its investment in Smith in 2016 using the equity method. 2) If Hossain chooses to use the fair value option, and the market price of Smith's common stock on 12/31/2016 is provide the journal entries Hossain will record. 3) Does this investment need to be tested for impairment? Briefly explain. $18.75 Question 2 ANSWER Investees Net Assets Net Assets Purchased 62 Difference Due to: Cost 15.75 Goodwill Fair value of assets acquired 185 46.25 6.25 Undervaluation of asset Book value of assets acquired 160 40 Journal Entries: Purchase Dr: Investment Cr: Cash 62 62 Share of Net Income Dr: Investment Cr: Investment revenue 8 8 Share of Dividends Dr: Cash Cr: Investment 3.2 3.2 Depreciation Adjustment Dr: Investment revenue Cr: Investment 0.78125 0.78125 Part 2 Book value Fair value 66.01875 75 If the market value of shares is $18.75 at end of the year and firm chooses fair value option, Fair Value Adjustment Dr: Fair value adjustment Cr: Unrealized holding gain - 1/S 8.98125 8.98125 Part 2 Alternative set of journal entries: Purchase: Dr: Investment Cr: Cash 62 62 3.2 Dividends: Dr: Cash Cr: Investment revenue 3.2 FV Adj: 13 Dr: Fair value adjustment Cr: Unrealized holding gain - I/S 13 Part 3 If this transaction is accounted for using the basic equity method (Part 1) then the asset is held at historic cost and the asset could be subject to impairment loss. If fair value option is used (part 2) then the asset is at fair value with unrealized gains and losses going through the income statement so there is no need to do an impairment test