On January 4, 2021, Runyan Bakery paid $326 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 $3.50 per share on December 15, 2021, and Lavery reported net income of $160 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $30 per share. On the purchase date, the book value of Lavery's identifiable net assets was $810 million and a. The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their book value by $40 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this invest equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account fie answers in millions. (.e., 10,000,000 should be entered as 10).)
On January 4, 2021, Runyan Bakery paid $326 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 $3.50 per share on December 15, 2021, and Lavery reported net income of $160 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $30 per share. On the purchase date, the book value of Lavery's identifiable net assets was $810 million and a. The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their book value by $40 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this invest equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account fie answers in millions. (.e., 10,000,000 should be entered as 10).)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 4, 2021, Runyan Bakery paid $326 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 $3.50 per share on December 15, 2021,
and Lavery reported net income of $160 million for the year ended December 31, 2021. The market value of Lavery's
common stock at December 31, 2021, was $30 per share. On the purchase date, the book value of Lavery's
identifiable net assets was $810 million and
a. The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their
book value by $40 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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this investm
equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field
answers in millions. (.e., 10,000,000 should be entered as 10).)
View transaction list
Journal entry worksheet
1
2
Transaction
3
Note: Enter debits before credits.
Record the purchase of Lavery Labeling stock for $326 million.
Record entry
4
5
General Journal
Clear entry
Debit
Credit
>
View general journal
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