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Winston Corp: Calculating Net Income

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Winston Corporation purchased 40% of the stock of Fullbright Company on January 21, 20x2, at underlying book value. The companies reported the following operating results and dividend payments during the first three years of intercorporate ownership.

See the required data in the attached document.

Compute the net income reported by Winston for each of the three years, assuming it accounts for investment in Fullbright using (a) the cost method; (b) the equity method

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Solution Summary

This tutorial shows how to calculate net income using cost and equity methods.

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The Cost Method

20X2 Winston Corporation's Operating Income $100,000
Winston Corporation's share of dividends from Fullbright Company $ 12,000
Net Income $112,000

20X3 Winston Corporation's Operating Income $60,000
Winston ...

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