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Prepare all appropriate journal entries related to the investment during 2013

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On January 4, 2013, Runyan Bakery paid $324 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 $2.00 per share on December 15, 2013, and Lavery reported net income of $160 million for the year ended December 31, 2013. The market value of Lavery's common stock at December 31, 2013, was $31 per share. On the purchase date, the book value of Lavery's net assets was $800 million and;The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $80 million.;The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill.;Required;Prepare all appropriate journal entries related to the investment during 2013, assuming Runyan accounts for this investment by the equity method.;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.

 

Paper#20760 | Written in 18-Jul-2015

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