Wingstop purchased 40% of the stock of Buffalo Chicks on January 1, 20X3, at und

Question

Wingstop purchased 40% of the stock of Buffalo Chicks on January 1, 20X3, at underlying book value. The companies reported the following operating results and dividend payment during the first 3 years of intercorporate ownership:

Computer the net income reported by Wingstop for each of the 3years, assuming it accounts for its investment in Buffalo chicks using the cost method.

WingStop Buffalo Chicks YearOperating Income Dividends 2H« 20C4 20x5 Net Income Divdends 100,0C0$40,00O$ TO,CC0$ 50,CCO 60,00O$8L,0CO$40,000$55,CCO 250,000 120,000 $ 25,000! $ 40,000 40,ECD

Explanation / Answer

Computation of net income reported by Wingstop for each of the 3 years

For the year 20x3

For the year 20x4

For the year 20x5

Operating Income $100,000 Dividend $20,000 Total Income $120,000

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