Dagger Company purchased 25 percent of the voting common stock of Lurch Corporation on July \(1,20 \times 6\) at \(\$ 10.000\) over underlying book value. The excess all relates to amortizable assets with a remaining life of 10 years. Both companies report on a calendar-year basis and pay dividends at the end of the year. All income is earned evenly throughout the year. The following income and dividend information is provided by the companies at the end of \(20 \mathrm{X} 9\) :

\section*{Required}
Compute net income for Dagger Company for each of the years using

(a) the cost method and

(b) the equity method.

Transcribed Image Text:

Operating Income. Year Dagger Company Net Income. Lurch Corporation Dagger Company Dividends Paid Lurch Corporation 20X6 $50,000 $10,000 $20,000 $ 4.000 20X7 50.000 30.000 10.000 20,000 20X8 50.000 22.000 20.000 30.000 20X9 50.000 40.000 10.000 20.000