Problem
Equity Method Accounting, Second Year
Palmetto Corporation acquired all of the voting stock of Steadman Company on January 2, 2021, by issuing stock with a fair value of $35,200,000. Steadman's book value was $11,000,000 at the date of acquisition, and its net assets were reported at amounts approximating fair value. However, Palmetto determined that Steadman had previously unreported identifiable intangibles with a fair value of $2,200,000 with a 4-year life. Steadman reported net income of $1,980,000 in 2021 and $2,750,000 in 2022 and declared and paid no dividends. There was no goodwill impairment in 2021, but impairment in 2022 was $880,000. Palmetto uses the compete equity method to report its investment in Steadman on its own books.
Task
1) Calculate equity in net income for 2022, reported on Palmetto's books.
2) Calculate the December 31, 2022, investment balance, reported on Palmetto's books.