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: Year 20X2 20X3 20X4 Winston Corporation Operating Income $100,000 Year 20X2 20X3 20X4 60,000 250,000 Net Income Dividends $ 40,000 80,000 120,000 Fair Value Fullbright Company Dividends 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. Equity Method Net Income $70,000 40,000 25,000 $30,000 60,000 50,000
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: Year 20X2 20X3 20X4 Winston Corporation Operating Income $100,000 Year 20X2 20X3 20X4 60,000 250,000 Net Income Dividends $ 40,000 80,000 120,000 Fair Value Fullbright Company Dividends 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. Equity Method Net Income $70,000 40,000 25,000 $30,000 60,000 50,000
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 1MC
Related questions
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:
Year
20X2
20X3
20X4
Winston Corporation
Operating
Income
$100,000
Year
20X2
20X3
20X4
60,000
250,000
Dividends
$ 40,000
80,000
120,000
Fullbright Company
Dividends
Net Income
Fair Value Equity Method
Net Income
$70,000
40,000
25,000
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.
$30,000
60,000
50,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fef387070-6080-4bbf-94d4-179906eb84fd%2Fc57fda15-eea9-4115-bc56-d632a4016645%2Fchbxm7y_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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:
Year
20X2
20X3
20X4
Winston Corporation
Operating
Income
$100,000
Year
20X2
20X3
20X4
60,000
250,000
Dividends
$ 40,000
80,000
120,000
Fullbright Company
Dividends
Net Income
Fair Value Equity Method
Net Income
$70,000
40,000
25,000
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.
$30,000
60,000
50,000
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