Question

On January 4, 2021, Runyan Bakery paid $352 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest in the net assets of Lavery and gave Runyan the ability to exercise significant influence over Lavery's operations. Runyan received dividends of $2.00 per share on December 15, 2021, and Lavery reported net income of $290 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $34 per share. On the purchase date, the book valu of Lavery's identifiable net assets was $940 million and a. The fair value of Lavery's depreciable assets, with an average remaining useful life of nine years, exceeded their book value by $90 million. b. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill. Required: 1. Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this investment by the equity method. 2. Prepare the journal entries required by Runyan, assuming that the 10 million shares represent a 10% interest in the net assets of Lavery rather than a 30% interest.

Answer 1

page:o1 Requered O appropiate fouinal entay sielated to investmeut duning ఇలవి pueichave : Pnvestment in lauery casle common shoret 352,000,000 | 352,000,000 net incomei invertment in laverry Common shores (30/ x290mi) 81,000,000 investment nevenue 87,000,000 Đividends : cash I $2pez shone payout X10 million shane 20,000,000 iovestment in lawery common sharei 20,000,000 depacáation_adjustanent: Linvestment nevenue (90 million X 30'l fayeans) 3,000,000 investment in +.umण adjusting antry : not requined using eguity mathod. common shares 3,000,000

poge: ☺ Requínad ® funchase: investment in lawery common.shores 352,000,000 cashe 352,000,000) net inceme No jauunal entry requined Ldividends: Tmohodoos wdे ह पु common shanes x10million shones) 20,000,000 Linvestment in lavery ২০,০00,000। Adjuting entay : 04 3upershorex 10 milshove)p51) net unnealized holding gaios and loses - oci | 1२,०००,000 fair adjustment value . t2,000,000