Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I'm not sure what I did wrong? Problem 12-11 Fair value option; equity method investments (LO12-5, 12-8] On January 4, 2018, Runyan Bakery paid $364

image text in transcribed

I'm not sure what I did wrong?

Problem 12-11 Fair value option; equity method investments (LO12-5, 12-8] On January 4, 2018, Runyan Bakery paid $364 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 chose the fair value option to account for this investment. Runyan received dividends of $4.50 per share on December 15, 2018, and Lavery reported net income of $350 million for the year ended December 31, 2018. The market value of Lavery's common stock at December 31, 2018, was $33 per share. On the purchase date, the book value of Lavery's net assets was $790 million and a. The fair value of Lavery's depreciable assets, with an average remaining useful life of five years, exceeded their book value by $100 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: Assuming Runyan accounts for this investment under the fair value option, prepare all appropriate journal entries in a manner similar to accounting for securities for which there is not significant influence. (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 View journal entry worksheet No Event General Journal Debit Credit 364 Investment in Lavery Labeling shares Cash 364 2 2 105 Investment in Lavery Labeling shares Cash 3 Cash Dividend revenue Unrealized holding gainOCI Fair value adjustment 5 5 No journal entry required

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting And Reporting

Authors: Barry Elliott, Jamie Elliott

11th Edition

0273708708, 9780273708704

More Books

Students also viewed these Accounting questions