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On January 3, 2018, Matteson Corporation acquired 30 percent of the outstanding common stock of O Toole Company for $1,209,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $840,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on its balance sheet. This copyright has a remaining useful life of 10 years. For the year ended December 31, 2018, OToole reported net income of $308,000 and declared cash dividends of $40,000. At December 31, 2018, what should Matteson report as its investment in O Toole under the equity method? .5 oints eBook Print References Investment wmmnss155Y
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Answer #1

Answer:

Calculation of investment in 'O' toole under the equity method
Amount($)
Purchase Price $12,09,000
Basis Equity accrual($3,08,000*30%)               92,400
(-) Copyright Amortization(($12,09,000-$8,40,000)/10 years              -36,900
(-)Dividends($40,000*30%)              -12,000
Investment Balance at December 31, 2018 $ 12,52,500
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