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    AJ Sutton
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    Matteson Corporation acquired 30% of O'Toole Company's common stock for $1,450,000 on January 3, 2013, giving Matteson significant influence over O'Toole. The book value of the shares was $910,000, with the excess $540,000 assigned to an undervalued copyright that has a 10-year useful life. For 2013, O'Toole reported $354,000 net income and paid $40,000 in dividends. Under the equity method, Matteson should report its investment in O'Toole as $1,490,200 at December 31, 2013.

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    Matteson Corporation acquired 30% of O'Toole Company's common stock for $1,450,000 on January 3, 2013, giving Matteson significant influence over O'Toole. The book value of the shares was $910,000, with the excess $540,000 assigned to an undervalued copyright that has a 10-year useful life. For 2013, O'Toole reported $354,000 net income and paid $40,000 in dividends. Under the equity method, Matteson should report its investment in O'Toole as $1,490,200 at December 31, 2013.

    Copyright:

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    324 views1 page

    Explanation

    Uploaded by

    AJ Sutton
    Matteson Corporation acquired 30% of O'Toole Company's common stock for $1,450,000 on January 3, 2013, giving Matteson significant influence over O'Toole. The book value of the shares was $910,000, with the excess $540,000 assigned to an undervalued copyright that has a 10-year useful life. For 2013, O'Toole reported $354,000 net income and paid $40,000 in dividends. Under the equity method, Matteson should report its investment in O'Toole as $1,490,200 at December 31, 2013.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 1

    On January 3, 2013, Matteson Corporation acquired 30 percent of the outstanding common stock of OToole Company for $1,450,000.

    This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $910,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on balance sheet. This copyright has a remaining useful life of 10 years. For the year ended December 31, 2013, OToole reported net income of $354,000 and paid cash dividends of $40,000. At December 31, 2013, what should Matteson report as its investment in OToole under the equity method? Investment $
    1,490,200

    Explanation:

    Purchase price Basic equity accrual ($354,000 30%) Amortization of copyright: Excess payment ($1,450,000 $910,000 = $540,000) to copyright allocated over 10 year life Dividends (40,000 30%) Investment in OToole at December 31, 2013

    1,450,000 106,200

    (54,000) (12,000)

    1,490,200

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