Problem 1-13 (Algo) (LO 1-4, 1-5) On January 3, 2021, Matteson Corporation acquired 30 percent of the outstanding common stock of O'Toole Company for $1,335,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $873,000. 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, 2021, O'Toole reported net income of $324,000 and declared cash dividends of $35,000. On December 31, 2021, what should Matteson report as its investment in O'Toole under the equity method? Investment

Required: On January 3, 2024, Matteson Corporation acquired 40 percent of the outstanding common stock of O'Toole Company for $1,379,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $863,000. 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, 2024, O'Toole reported net income of $353,000 and declared cash dividends of $35,000. On December 31, 2024, what should Matteson report as its investment in O'Toole under the equity method? Investment

A-1

Problem 2-28 (Algo) (LO 2-4, 2-7) On January 1, 2024, Casey Corporation exchanged $3,327,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems. At the acquisition date, Casey prepared the following fair-value allocation schedule: Fair value of Kennedy (consideration transferred) Carrying amount acquired Excess fair value to buildings (undervalued) to licensing agreements (overvalued) to goodwill (indefinite life) Cash Accounts receivable Inventory Investment in Kennedy Buildings (net) Licensing agreements Goodwill Total assets Accounts payable Long-term debt Common stock Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses). Accounts Additional paid-in capital Retained earnings Total liabilities and equities…