P 12–9Investment securities and equity method investments compareda. 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:Cost324,000,000 BV of the net assets240,000,000 >800million*30%Excess cost over BV84,000,000 Allocation of excess cost:AmortizationDepreciable assets80million*30%24,000,000 4,000,000 >2400000/6GW60,000,000 N/A1/4/2013 Investment in Lavery Co324,000,000 Cash324,000,000 12/31/2013 Investment in Lavery Co48,000,000 >160million income*30%Investment Rev48,000,000 12/31/2013 Cash20,000,000 >10million shares *2/share
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