On january 4 2011 runyan bakery paid 324 million for 10

Assignment Help Accounting Basics

Reference no: EM13600641

On January 4, 2011 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 chose the fair value option to account for this investment. Runyan received dividends of $2.00 per share on December 15, 2011, and Lavery reported net income of $160 million for the year ended December 31, 2011. The market value of Lavery's common stock at December 31, 2011, was $31 per share. On the purchase date, the book value of Lavery's net assets was $800 million and:

a. The fair value of Lavery's depreciable assets, with an average remaining useful life of six years, exceeded their book value by $80 million.

b. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to good will.

Required:
1. Prepare all appropriate journal enttires related to the investment during 2011, assuming Runyan accounts for this investment under the fair value option and accounts for the Lavery investment in a manner similar to what they would use for trading securities.

2. What would be the effect of this investment on Runyan's 2011 net income?

Reference no: EM13600641

Questions Cloud

Proposals a and b each cost 400000 have 5-year lives and : proposals a and b each cost 400000 have 5-year lives and have expected total cash flows of 470000. proposal a is

Fde manufacturing company has a normal plant capacity of : fde manufacturing company has a normal plant capacity of 37500 units per month. because of an extra large quantity of

Pacific products inc completed and transferred 150000 : pacific products inc. completed and transferred 150000 particle board units of production from the pressing department.

The converting department of stay-soft napkin company had : the converting department of stay-soft napkin company had 760 units in the work in process at the beginning of the

On january 4 2011 runyan bakery paid 324 million for 10 : on january 4 2011 runyan bakery paid 324 million for 10 million shares of lavery labeling company common stock. the

Materials constitute a significant part of the : materials constitute a significant part of the manufacturing costs of an organization and therefore it is essential

What is the increase or decrease in profits as a result of : for many years diehl company has produced a small electrical part that it uses in the production of its standard line

An investor purchased 500 shares of common stock 25 par for : an investor purchased 500 shares of common stock 25 par for 21750. subsequently 100 shares were sold for 40.50 per

If the sales manager receives a bonus of 20 cents for each : novelties inc produces and sells highly faddish products directed towards the preteen market. a new product has come

User Account

All Pages