1. On January 4, 2021, ABC Corp. acquired 30% of the outstanding common stock of Pepsi Co. for $1,300,000. This acquisition gave ABC the ability to exercise significant influence over the investee. The book value of the acquired shares was $1,175,000. Any excess cost over the underlying book value was assigned to a copyright that was undervalued on Pepsis balance sheet. This copyright has a remaining useful life of ten years. For the year ended December 31, 2021, Pepsi reported net income of $368,000 and paid cash dividends of $107,000.

What is the balance that ABC should report as its Investment in Pepsi Co. at December 31, 2021?

2. On January 3, 2021, ABC Corporation acquired 40 percent of the outstanding common stock of Pepsi Co. for $1,370,000. This acquisition gave ABC the ability to exercise significant influence over the investee. The book value of the acquired shares was $866,000. Any excess cost over the underlying book value was assigned to 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, Pepsi reported net income of $278,000 and declared cash dividends of $30,000.

On December 31, 2021, what should ABC report as its investment in Pepsi under the equity method?

3. On January 1, 2020, ABC, Inc., paid $62,500 for a 40 percent interest in Pepsi Co.s common stock. This investee had assets with a book value of $220,500 and liabilities of $87,000. A patent held by Pepsi having a $8,100 book value was actually worth $20,100. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2020, Pepsi earned income of $42,000 and declared and paid dividends of $14,000. In 2021, it had income of $57,000 and dividends of $19,000. During 2021, the fair value of ABCs investment in Pepsi had risen from $74,100 to $81,000.

Assuming ABC uses the equity method, what balance should appear in the Investment in Pepsi account as of December 31, 2021?