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:

Type II Error

A statistical error that occurs when one fails to reject a false null hypothesis, also known as a false negative.

Difference-In-Difference

An estimator that identifies the causal effect of a treatment, like a special promotion, by comparing the periods before and after the treatment between an experimental group and a control group. The second difference is designed to remove selection bias.

Price Change

A fluctuation in the market value of goods or services.

Lost Profits

The amount of money a business fails to earn due to disruptions, such as contractual breaches, acts of negligence, or other causes.