Long Company owns 25 percent of Computech Company's common stock, purchased December 28, 20X3, at book value. During the two years following the acquisition of its stock by Long, Computech reported net income and dividends and Long reported operating income as follows:

Required 

Compute the amount of income tax expense and net income Long Company should report for each year assuming an 80 percent exemption of intercompany dividends and assuming that Long has an effective tax rate of 40 percent and reports its investment in Computech using:

a. The cost method 

b. The equity method.

Transcribed Image Text:

80 (1) X Z X Z -70 .90 .30 Z 80