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

question 17

Essay

Shoreline Corporation had $3,000,000 of $10 par value common stock outstanding on January 1,2012,and retained earnings of $1,000,000 on the same date.During 2012,2013,and 2014,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 1,2012,Pebble purchased 21% of Shoreline's outstanding common stock for $1,240,000.On January 1,2013,Pebble purchased 9% of Shoreline's outstanding stock for $510,000,and on January 1,2014,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 2012,2013,and 2014?
2.What will be the December 31,2014 balance in the Investment in Shoreline account after all adjustments have been made?

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Definitions:

Upward-Sloping

Describes a line on a graph that inclines from left to right, indicating a positive relationship between two variables.

Natural Gas

A fossil fuel composed mainly of methane, used as a source of energy for heating, cooking, and electricity generation.

Market Rate Of Interest

The prevailing rate at which borrowers and lenders agree to transact, typically influenced by supply and demand in the financial markets.

Present Value

The today's value of money or cash flows to be received in the future, factored by a particular rate of return.