FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On January 4, 2024, Runyan Bakery paid $334 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 $4.00 per
share on December 15, 2024, and Lavery reported net
income of $200 million for the year ended December
31, 2024. The market value of Lavery's common stock
at December 31, 2024, was $31 per share. On the
purchase date, the book value of Lavery's identifiable
net assets was $850 million and: The fair value of
Lavery's depreciable assets, with an average remaining
useful life of nine years, exceeded their book value by $
90 million. 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 2024, assuming Runyan accounts for
this investment by the equity method. 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.
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Transcribed Image Text:On January 4, 2024, Runyan Bakery paid $334 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 $4.00 per share on December 15, 2024, and Lavery reported net income of $200 million for the year ended December 31, 2024. The market value of Lavery's common stock at December 31, 2024, was $31 per share. On the purchase date, the book value of Lavery's identifiable net assets was $850 million and: The fair value of Lavery's depreciable assets, with an average remaining useful life of nine years, exceeded their book value by $ 90 million. 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 2024, assuming Runyan accounts for this investment by the equity method. 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.
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