Problem 12-12 (Algo) Fair value option; equity method investments (L012-5, 12-6, 12-7, 12-8) On January 4, 2021, Runyan Bakery paid $334 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 per share on December 15, 2021, and Lavery reported net income of $200 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $31 per share. On the purchase date, the book value of Lavery's identifiable net assets was $850 million and 8. The fair value of Lavery's depreciable assets, with an average remaining useful life of nine years, exceeded their book value by $90 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-a. Prepare all appropriate Journal entries related to the investment during 2021, assuming Runyan accounts for this investment under the fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securities for which there is not significant influence 1-b. Calculate the effect of these journal entries on 2021 net income, and the amount at which the investment is carried in the December 31, 2021, balance sheet. 2.a. Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this investment under the fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then records a fair value adjustment at the end of the year that allows it to comply with GAAP. 2.6. Calculate the effect of these journal entries on 2021 net income, and the amount at which the investment is carried in the December 31, 2021, balance sheet (Note: You should end up with the same total 2021 Income effect and some carrying value on the balance sheet for requirements 1 and 2.) Answer is complete but not entirely correct. --- Complete this question by entering your answers in the tabs below. Req 1A Reg 1B Reg 2A Req 28 Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this investment under the fair value option, and accounts for the Lavery Investment in a manner similar to what it would use 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 (le, 10,000,000 should be entered as 10).) Show less No General Journal Transaction 01 Debit Gredit 1 Investment in equity securities Cash 334 334 N 2 2 Investment in equity securities Investment revenue 60 X 60 3 3 40 Cash Investment in equity securities 40 > 4 4 4 3 Investment revenue Investment in equity securities 33 Req 1A Reg 1B Req 2A Reg 28 Prepare all appropriate journal entries related to the investment during 2021, assuming Runyan accounts for this investment under the fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then records a fair value adjustment at the end of the year that allows it to comply with GAAP. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions de 10,000,000 should be entered as 10).) Show less No Transaction 1 Credit 1 General Journal Investment in equity affiliate Cash Debit 334 > 334 2 2 Cash Investment in equity affiliate 40 & 403 3 3 Cash Investment in equity affiliate 60 X C 60 4 Investment in equity affiliate Investment revenue 10 % * 10 $ 5 5 24 Loss on investment (unrealized, OCI) Investment in equity affiliate 3 24 Complete this question by entering your answers in the tabs below. Req 1A Req 18 Reg 2A Req 28 Calculate the effect of these journal entries on 2021 net income, and the amount at which the investment is carried in the December 31, 2021, balance sheet. (Note: You should end up with the same total 2021 Income effect and same carrying value on the balance sheet for requirements 1 and 2.) (Enter your answers in millions (1.6., 10,000,000 should be entered as 19)) Show less Net Income Investment $ $ 26 x million 320 million