Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 12-12 Fair value option; equity method investments [L012-5, 12-6, 12-7, 12-8 On January 4, 2018, Runyan Bakery paid $344 million for 10 million shares

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Problem 12-12 Fair value option; equity method investments [L012-5, 12-6, 12-7, 12-8 On January 4, 2018, 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 chose the fair value option to account for this investment. Runyan received dividends of $4 per share on December 15, 2018, and Lavery reported net income of $250 million for the year ended December 31, 2018. The market value of Lavery's common stock at December 31, 2018, was $32 per share. On the purchase date, the book value of Lavery's net assets was $900 million and: a. The fair value of Lavery's depreciable assets, with an average remaining useful life ora(27)] years, exceeded their book value by $70 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 2018, 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 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet. 2-a. Prepare all appropriate journal entries related to the investment during 2018, 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-b. Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet KPrev 14 of 15Next> 19 vo F8 Req 1A Req 1B Req 2A Req 28 Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this investment und fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securities for which there i significant influence. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. your answers in millions (i.e., 10,000,000 should be entered as 10).) Shov View transaction list Journal entry worksheet 4 Record the purchase of Lavery Labeling stock for $344 million. Note: Enter debits before credits. General Journal Debit Credit Event K Prey 14 of 15 Next > Req 1A Req 1B Req 2A Req 28 Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts fair value option, and accounts for the Lavery investment in a significant influence. (If no entry is required for a transaction/event, select "No journal entry required" in t your answers in millions (i.e., 10,000,000 should be entered as 10).) manner similar to what it would use for secu View transaction list Journal entry worksheet 2 3 4 5 Record Runyan Bakery's share of Lavery's $250 million net income Note: Enter debits before credits. General Journal Debit Credit Even Next Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 28 Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this inve fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securities for wh significant influence. (If no entry is required for a transaction/event, select "No journal entry required" in the first acc your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet K1 2 3 4 5 Record the receipt of cash dividends of $4.50 per share on 10 million shares. Note: Enter debits before credits. General Journal Debit Credit Event Complete this question by entering your answers in the tabs below. Req 1A Req 18 Req 2A Req 2B Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this i fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securities fo significant influence. (If no entry is required for a transaction/event, select "No journal entry required" in the first a your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet 4 5 Record any necessary entry related to depreciation. The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $70 million. Note: Enter debits before credits. Event General Journal Debit Credit Req 1A Req 1B Req 2A Req 2B Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securiti significant influence. (If no entry is required for a transaction/event, select "No journal entry required" in the your answers in millions (i.e., 10,000,000 should be entered as 10) View transaction list Journal entry worksheet 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, 2018 was $32 per share. Note: Enter debits before credits. Event General Journal Debit Credit K Prev 14 of 15ll Next > Required: 1-a. Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this the fair value option, and accounts for the Lavery investment in a manner similar to what it would use for securities f not significant influence. 1-b. Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is car December 31, 2018, balance sheet. 2-a. Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for th the fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then re adjustment at the end of the year that allows it to comply with GAAP. 2-b. Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is car December 31, 2018, balance sheet. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2A Req 2B Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is carried in December 31, 2018, balance sheet. (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Effect on net income million million Investment Req 1A Req 2A> K Prev 14 of 15 ll Next> compiete this question uy enuering your answers in une taus Derow Req 1A Req 18 Req 2A Req 28 Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this inv fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then records adjustment at the end of the year that allows it to comply with GAAP. (If no entry is required for a transaction/event 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 Journal entry worksheet 4 5 Record the purchase of Lavery Labeling stock for $344 million. Note: Enter debits before credits. Event General Journal Debit Credit K Prey 14 of 15 lI Next > Help Sa Compiete tnis question gy enverng your answers in une taus uerow Req 1A Req 18 Req 2A Req 2B Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this investmen fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then records a fair adjustment at the end of the year that allows it to comply with GAAP. (If no entry is required for a transaction/event, select 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 Journal entry worksheet 4 5 Record Runyan Bakery's share of Lavery's $250 million net income. Note: Enter debits before credits. Event General Journal Debit Credit 2 compiete this question uy envering your answers in une taus verow Req 1A Req 1B Req 2A Req 2B Prepare all appropriate journal entries related to the investment during 2018, assuming Runyan accounts for this investn fair value option, but uses equity method accounting to account for Lavery's income and dividends, and then records af adjustment at the end of the year that allows it to comply with GAAP. (If no entry is required for a transaction/event, se 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 Journal entry worksheet 2 4 Record any necessary entry related to depreciation. The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $70 million. Note: Enter debits before credits. Debit Credit General Journal Event 14 of 15 ll Next > Required: 1-a. Prepare all appropriate journal entries related to the investment during 2018, 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 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet. 2-a. Prepare all appropriate journal entries related to the investment during 2018, 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-b. Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet. mplete this question by entering your answers in the tabs below. Co Req 18 Req 2A Req 2B Req 1A Calculate the effect of these journal entries on 2018 net income, and the amount at which the investment is carried in the December 31, 2018, balance sheet. (Enter your answers in millions (ie, 10,000,000 should be entered as 10) million Net income million Investment Req 2A Next >

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

Auditory Interfaces

Authors: Stefania Serafin, Bill Buxton, Bill Gaver, Sara Bly

1st Edition

1032196459, 978-1032196459

More Books

Students also viewed these Accounting questions