1/ John Wiggins is considering the purchase of a smallrestaurant. The purchase price listed by the seller is $850,000.John has used past financial information to estimate that the netcash flows (cash inflows less cash outflows) generated by therestaurant would be as follows: (FV of $1, PV of $1, FVA of $1, PVAof $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) fromthe tables provided.) Years Amount 1-6 $ 85,000 7 75,000 8 65,000 955,000 10 45,000 If purchased, the restaurant would be held for 10years and then sold for an estimated $750,000. Required: Determinethe present value, assuming that John desires a 10% rate of returnon this investment. (Assume that all cash flows occur at the end ofthe year.) (Do not round intermediate calculations. Round yourfinal answers to nearest whole dollar amount.)
2/ On January 4, 2018,Runyan Bakery paid $326 million for 10 million shares of LaveryLabeling Company common stock. The investment represents a 30%interest in the net assets of Lavery and gave Runyan the ability toexercise significant influence over Lavery's operations. Runyanreceived dividends of $3.50 per share on December 15, 2018, andLavery reported net income of $160 million for the year endedDecember 31, 2018. The market value of Lavery's common stock atDecember 31, 2018, was $30 per share. On the purchase date, thebook value of Lavery's net assets was $810 million and:
- The fair value of Lavery's depreciable assets, with an averageremaining useful life of four years, exceeded their book value by$40 million.
- The remainder of the excess of the cost of the investment overthe book value of net assets purchased was attributable togoodwill.
Required:
1. Prepare all appropriate journal entries relatedto the investment during 2018, assuming Runyan accounts for thisinvestment by the equity method.
2. Prepare the journal entries required by Runyan,assuming that the 10 million shares represent a 10% interest in thenet assets of Lavery rather than a 30% interest.
there are twodifferent question
