Halstead’s 2018 income statement

Homework- Chapter 1

13. On January 3, 2018, Matteson Corporation acquired 40 percent of the outstanding common stock of O’Toole Company for $1,160,000. This acquisition gave Matteson the ability to exercise significant influence over the investee. The book value of the acquired shares was $820,000. 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, O’Toole reported net income of $260,000 and declared cash dividends of $50,000. At December 31, 2018, what should Matteson report as its investment in O’Toole under the equity method?

18.  Milani, Inc., acquired 10 percent of Seida Corporation on January 1, 2017, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2018, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida’s common stock was $2,000,000 in total. Seida’s January 1, 2018, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida’s book value was attributable to a trademark with an 8-year remaining life. During 2018, Seida reported income of $300,000 and declared and paid dividends of $110,000. Prepare the 2018 journal entries for Milani related to its investment in Seida.

21. On January 1, 2016, Halstead, Inc., purchased 75,000 shares of Sedgwick Company common stock for $ 1,480,000, giving Halstead 25 percent ownership and the ability to apply significant influence over Sedgwick. Any excess of cost over book value acquired was attributed solely to goodwill.

Sedgwick reports net income and dividends as follows. These amounts are assumed to have occurred evenly throughout these years. Dividends are declared and paid in the same period.

  Net Income Cash Dividends (paid quarterly)
2016 $340,000 $120,000
2017   480,000   140,000
2018   600,000   160,000

On July 1, 2018, Halstead sells 12,000 shares of this investment for $25 per share, thus reducing its interest from 25 to 21 percent, but maintaining its significant influence.

Determine the amounts that would appear on Halstead’s 2018 income statement relating to its ownership and partial sale of its investment in Sedgwick’s common stock.