For 2012,2013,and 2014,Squid Corporation Earned Net Incomes of $40,000,$70,000,and $100,000,respectively,and

question 34

Essay

For 2012,2013,and 2014,Squid Corporation earned net incomes of $40,000,$70,000,and $100,000,respectively,and paid dividends of $24,000,$32,000,and $44,000,respectively.On January 1,2012,Squid had $500,000 of $10 par value common stock outstanding and $100,000 of retained earnings.
On January 1 of each of these years,Albatross Corporation bought 5% of the outstanding common stock of Squid paying $37,000 per 5% block on January 1,2012,2013,and 2014.All payments made by Albatross in excess of book value were attributable to equipment,which is depreciated over five years on a straight-line basis.
Required:
1.Assuming that Albatross uses the cost method of accounting for its investment in Squid,how much dividend income will Albatross recognize for each of the three years and what will be the balance in the investment account at the end of each year?
2.Assuming that Albatross has significant influence and uses the equity method of accounting (even though its ownership percentage is less than 20%),how much net investee income will Albatross recognize for each of the three years?

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Definitions:

Clangs

The patterning of speech characterized by rhyming or alliteration, often seen in conditions like bipolar disorder or schizophrenia during manic or psychotic episodes.

Future Emotional Experience

The anticipated feelings or emotional states one expects to encounter in response to future events or situations.

Auditory Hallucination

The perception of sound, often of voices, that is not present in the external environment.

Somatic Hallucination

A type of hallucination where an individual feels as if they are experiencing physical sensations that have no physical cause.