Question
4 apply On January 4, 2021, Runyan Bakery paid $344 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a
4 apply
On January 4, 2021, 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, 2021, and Lavery reported net income of $250 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $32 per share. On the purchase date, the book value of Lavery's identifiable net assets was $900 million and:
- The fair value of Lavery's depreciable assets, with an average remaining useful life of seven years, exceeded their book value by $70 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: 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.
Required 1 Required 2 Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries ne For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and reco entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 8 9 10 Record the acquisition of 8% Distribution Transformers Corporation bonds costing $420,000 at face value. Note: Enter debits before credits. General Journal Debit Credit Date March 31, 2021 Record entry Clear entry View general journalStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started