On January 4, 2024, Runyan Bakery paid $344 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 $4.50 per share on December 15, 2024, and Lavery reported net income of $250 million for the year ended December 31, 2024. The market value of Lavery's common stock at December 31, 2024, was $32 per share. On the purchase date, the book value of Lavery's identifiable net assets was $900 million and: a. The fair value of Lavery's depreciable assets, with an average remaining useful life of seven years, exceeded their book value by $70 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
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On January 4, 2024, Runyan Bakery paid $344 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 $4.50 per share on December 15, 2024, and Lavery reported net income of $250
million for the year ended December 31, 2024. The market value of Lavery's common stock at December 31, 2024, was $32 per share.
On the purchase date, the book value of Lavery's identifiable net assets was $900 million and:
a. The fair value of Lavery's depreciable assets, with an average remaining useful life of seven years, exceeded their book value by
$70 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.
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 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).
View transaction list
Journal entry worksheet
1 2 3 4 5
Record the purchase of Lavery Labeling stock for $344 million.
Show less
Transcribed Image Text:On January 4, 2024, Runyan Bakery paid $344 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 $4.50 per share on December 15, 2024, and Lavery reported net income of $250 million for the year ended December 31, 2024. The market value of Lavery's common stock at December 31, 2024, was $32 per share. On the purchase date, the book value of Lavery's identifiable net assets was $900 million and: a. The fair value of Lavery's depreciable assets, with an average remaining useful life of seven years, exceeded their book value by $70 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. 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 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). View transaction list Journal entry worksheet 1 2 3 4 5 Record the purchase of Lavery Labeling stock for $344 million. Show less
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