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On January 4, 2021, Runyan Bakery paid $332 million for 10 million shares of Lavery Labeling Company common stock. The investment represents a 30% interest

On January 4, 2021, Runyan Bakery paid $332 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 $190 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $30 per share. On the purchase date, the book value of Lavery's identifiable net assets was $840 million and:

  1. The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their book value by $80 million.
  2. 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.Prepareall 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: Prepareall appropriate journal entries related to the investment during 2021, assumingRunyanaccounts for this investment by the equity method.

Transaction 1 Record the purchase of Lavery Labeling stock for $332 million.

Transaction 2 Record Runyan Bakery's share of Lavery's $190 million net income.

Transaction 3 Record the receipt of cash dividends of $4.5 per share on 10 million shares.

Transaction 4 Record any necessary entry related to depreciation. The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their book value by $80 million.

Transaction 5 Record any necessary adjusting entry to correctly report the investment on the balance sheet. The market value of Lavery's common stock at December 31, 2021 was $30 per share.

Required 2: Record any necessary adjusting entry to correctly report the investment on the balance sheet. The market value of Lavery's common stock at December 31, 2021 was $30 per share.

Transaction 1 Record the purchase of Lavery Labeling stock for $332 million.

Transacrion 2 Record Runyan Bakery's share of Lavery's $190 million net income.

Transaction 3 Record the receipt of cash dividends of $4.5 per share on 10 million shares.

Transaction 4 Record any necessary adjusting entry to correctly report the investment on the balance sheet. The market value of Lavery's common stock at December 31, 2021 was $30 per share.

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