12 Equity Method and FV option

12 Equity Method and FV option - P 129 LO123 LO124,LO125...

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P 12–9 Investment securities and equity method investments compared 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 goodwill. Required: 1. Prepare all appropriate journal entries related to the investment during 2013, 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. Calculation of excess cost over BV: Cost 324,000,000 BV of the net assets 240,000,000 >800million*30% Excess cost over BV 84,000,000 Allocation of excess cost: Amortization Depreciable assets 80million*30% 24,000,000 4,000,000 >2400000/6 GW 60,000,000 N/A 1/4/2013 Investment in Lavery Co 324,000,000 Cash 324,000,000 12/31/2013 Investment in Lavery Co 48,000,000 >160million income*30% Investment Rev 48,000,000 12/31/2013 Cash 20,000,000 >10million shares *2/share
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