Shoreline Corporation Had $3,000,000 of $10 Par Value Common Stock

question 28

Essay

Shoreline Corporation had $3,000,000 of $10 par value common stock outstanding on January 1,2009,and retained earnings of $1,000,000 on the same date.During 2009,2010,and 2011,Shoreline earned net incomes of $400,000,$700,000,and $300,000,respectively,and paid dividends of $300,000,$550,000,and $100,000,respectively.
On January 1,2009,Pebble purchased 21% of Shoreline's outstanding common stock for $1,240,000.On January 1,2010,Pebble purchased 9% of Shoreline's outstanding stock for $510,000,and on January 1,2011,Pebble purchased another 5% of Shoreline's outstanding stock for $320,000.All payments made by Pebble that are in excess of the appropriate book values were attributed to equipment,with each block depreciable over 20 years under the straight-line method.
Required:
1.What is the adjustment to Investment Income for depreciation expense for Pebble's investment in Shoreline in 2009,2010,and 2011?
2.What will be the December 31,2011 balance in the Investment in Shoreline account after all adjustments have been made?

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Definitions:

Gross Pay

The total amount of an employee's earnings before any deductions are made, such as taxes and retirement contributions.

Biweekly Paycheck

A payroll schedule where employees receive wages every two weeks, resulting in 26 paychecks per year.

Checking Account

An account at a bank that allows a customer to deposit money and make withdrawals from the funds on deposit using a paper check or electronic transfer.

Flat Rate

A pricing strategy where a single fixed fee is charged for a service, regardless of usage or time.