3. Matthews Co. acquired 80% of the common stocks of Jackson Co. on January 1, 2017.As of that date, Jackson had the following trial balance:

Debit Credit

Cash and cash equivalents$ 70,000

Accounts receivable (net)50,000

Inventory110,000

Supplies20,000

Land90,000

Buildings-net (20 years remaining life)140,000

Equipment-net (8 years remaining life)240,000

Long-term liabilities (mature 12/31/2021)180,000Common stocks300,000

Additional paid-in capital60,000

Retained earnings, 1/1/2017120,000

Totals$ 720,000$

Matthews Co. acquired 80% of the common stock of Jackson Co. for $560,000 in cash. The fair value of 20% noncontroling interest is $128,000. As of January 1, 2017, Jackson's land had a fair value of $102,000. Its buildings had a fair value of $168,000, and its equipment had a fair value of $216,000. Its long-term liabilities had a fair value of 160,000. It's unrecorded in- process Research and Development was valued at $100,000. All other assets and liabilities had fair values equal to their book values.

Matthews decided to use the initial value method for this investment.

During 2017, Jackson reported net income of $96,000 while paying dividends of 12,000.During 2018, Jackson reported net income of $132,000 while paying dividends of 36,000.