Shine Corporation purchased 30 percent of the common stock of Ash
Corporation on January 1, 2002, at $28,000 in excess of underlying book
value. The excess is attributable to equipment with a remaining useful
life of 2 years. The companies reported the following operating results
and dividends for the 3 years following the date of purchase:
Shine Ash
Operating Income Dividends Net Income Dividends
2002 1,000,000 130,000 400,000 40,000
2003 960,000 140,000 300,000 40,000
2004 1,200,000 140,000 500,000 22,000
Required:
A) Compute the net income reported by Shine for each of the 3 years,
assuming Shine accounts for its investment in Ash using the cost method.
B) Compute the net income reported by Shine for each of the 3 years,
assuming Shine accounts for its investment in Ash using the equity
method.
Click here for the solution: Shine Corporation purchased 30 percent of the common stock of Ash Corporation on January 1, 2002
