Question
Dog Corporation purchased 35% of the stock of Pup Company on January 1, 20X8, at underlying book value. During the period of January 1, 20X8
Dog Corporation purchased 35% of the stock of Pup Company on January 1, 20X8, at underlying book value. During the period of January 1, 20X8 and December 31, 20X9, the market value of Dog's investment in Pup's stock increased by $25,000 each year. The Companies reported the following operating results and dividend payments during the first two years of intercorporate ownership:
| Dog Corporation |
| Pup Company | ||
Year | Operating Income | Dividends |
| Operating Income | Dividends |
20X8 | $200,000 | $40,000 |
| $70,000 | $30,000 |
20X9 | 60,000 | 50,000 |
| 40,000 | 60,000 |
Compute the net income reported by Dog for 20X9, assuming it accounts for its investment in Pup by using the equity method.
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