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7) On January 4, 2021, Runyan Bakery paid $340 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 $2.60 per share on December 15, 2021, and Lavery reported net income of $230 million for the year ended December 31, 2021. The market value of Lavery's common stock at December 31, 2021, was $32 per share. On the purchase date, the book value of Lavery's identifiable net assets was $880 million and:

1. The fair value of Lavery's depreciable assets, with an average remaining useful life of four years, exceeded their book value by $120 million.
2. 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 2021, 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.

9) At the beginning of 2021, VHF Industries acquired a machine with a fair value of $6,465,810 by signing a three-year lease. The lease is payable in three annual payments of $2.6 million at the end of each year. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1. What is the effective rate of interest implicit in the agreement? 2-4. Prepare the lessees journal entries at the beginning of the lease, the first lease payment at December 31, 2021 and the second lease payment at December 31, 2022. 5. Suppose the fair value of the machine and the lessors implicit rate were unknown at the time of the lease, but that the lessees incremental borrowing rate of interest for notes of similar risk was 9%. Prepare the lessees entry at the beginning of the lease.

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