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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: 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 2024, 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.

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: 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 2024, 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2024, assuming Runyan accounts for this investment by the equity method. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). 1 No 2 3 4 5 Required 1 No 1 Transaction 2 3 4 1 2 3 4 5 Transaction 1 2 3 Investment in equity affiliate Cash 4 Investment in equity affiliate Interest revenue Cash Required 2 Investment in equity affiliate Interest revenue Investment in equity affiliate No journal entry required General Journal < Required 1 No journal entry required Cash Investment in equity securities Cash General Journal Gain on investment (NI) Fair value adjustment Investment in equity securities X3 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. 33 Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). < Required 1 >> Required 2 > *3 Debit X Required 2 > 334 60✔ 40✔ 30 Debit 344 x 40 Credit 24 334 60 40 30 Credit Show less 344 40 24 Show less A "
Transcribed Image Text:Required 1 Required 2 Prepare all appropriate journal entries related to the investment during 2024, assuming Runyan accounts for this investment by the equity method. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). 1 No 2 3 4 5 Required 1 No 1 Transaction 2 3 4 1 2 3 4 5 Transaction 1 2 3 Investment in equity affiliate Cash 4 Investment in equity affiliate Interest revenue Cash Required 2 Investment in equity affiliate Interest revenue Investment in equity affiliate No journal entry required General Journal < Required 1 No journal entry required Cash Investment in equity securities Cash General Journal Gain on investment (NI) Fair value adjustment Investment in equity securities X3 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. 33 Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). < Required 1 >> Required 2 > *3 Debit X Required 2 > 334 60✔ 40✔ 30 Debit 344 x 40 Credit 24 334 60 40 30 Credit Show less 344 40 24 Show less A "
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: 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 2024, 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.
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: 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 2024, 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.
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