Long Company owns 25 percent of Computech Company's common stock, purchased December 28, 20X3, at book value.
Question:
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.
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Related Book For
Advanced Financial Accounting
ISBN: 978-0073526911
8th Edition
Authors: Richard Baker, Valdean Lembke, Thomas King, Cynthia Jeffrey
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