Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at underlying
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Question:
Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at underlying book value. During the period of January 1, 20X2, through December 31, 20X4, the market value of Winston\\\'s investment in Fullbright\\\'s stock increased by $20,000 each year. 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 | 25,000 | 50,000 | |||||||||||||
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Required:
Compute the net income reported by Winston for each of the three years, assuming it accounts for its investment in Fullbright by carrying the investment at fair value, or using the equity method.
Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
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