For 2010,2011,and 2012,Squid Corporation Earned Net Incomes of $40,000,$70,000,and $100,000,respectively,and

question 4

Essay

For 2010,2011,and 2012,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 1,2010,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 1,2010,2011,and 2012.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:

Primary Visual Cortex

The region of the brain located in the occipital lobe that is responsible for processing visual information.

Occipital Lobe

The area of the cerebral cortex situated in the rear part of the brain, tasked with interpreting visual data.

Parietal Lobe

A region of the cerebral cortex involved in processing sensory information regarding the location of parts of the body as well as interpreting visual information and processing language and mathematics.

Parietal

Relating to the parietal lobe of the brain, which processes sensory information like touch, temperature, and pain.