Cost versus Equity Reporting
Winston Corporation purchased 40 percent of the stock of Fullbright Company on January 1, 20X2, at underlying book value. The companies reported the following operating results and dividend payments during the first three years of intercorporate ownership:
Year | Winston Corporation | Fullbright Company | ||
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 |
Required
Compute the net income reported by Winston for each of the three years, assuming it accounts for its investment in Fullbright using (a) the cost method and (b) the equity method.
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