Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at...

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Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at underlying book value. Dur

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Answer 1

Answer #1

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Year	Fair value	Equity method
20x2	$112000 (100000+0.4(30000))	$128000 (100000+0.4(70000))
20x3	$84000 (60000+0.4(60000))	$76000 (60000+0.4(40000))
20x4	$268000 (250000+0.4(20000+25000))	$260000 (250000+0.4(25000))

Dividends paid from undistributed earnings of prior years
(70000+40000-30000-60000= 20000) and 25000 earnings of current period.

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Answer 2

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