Question
On January 4, 2016, Runyan Bakery paid $326 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest
On January 4, 2016, Runyan Bakery paid $326 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 $3.50 per share on December 15, 2016, and Lavery reported net income of $160 million for the year ended December 31, 2016. The market value of Lavery's common stock at December 31, 2016, was $30 per share. On the purchase date, the book value of Lavery's net assets was $810 million and: |
a. | The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their book value by $40 million. | |||||||
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