Reference no: EM132727171
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
Required:
Problem 1: 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. (Fill out for both the fair value method and equity method for each year.)
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