Problem:
Winston corporation purchased 40% of the stock of Fullbright Company on January 21, 20x2, at underlying bookvalue. The companies reported the following operating results and dividend payments during the first three years of intercorporate ownership.
|
|
Winston Corporation
|
Fullbright Company
|
|
Year
|
Operating Income
|
Dividends
|
Net Income
|
Dividends
|
|
20x2
|
$100,000
|
40,000
|
70,000
|
30,000
|
|
20x3
|
60,000
|
80,000
|
40,000
|
60,000
|
|
20x4
|
250,000
|
120,000
|
250,000
|
50,000
|
Required:
Compute the net income reported by Winston for each of the three years, assuming it accoutns for investment in Fullbright using (a) the cost method; (b) the equity method