Income recording. Tucker Corporation purchases a 25% interest in Lincoln Company for $120,000 on January 1, 2017. The following determination and distribution of excess schedule is prepared:
Lincoln Company earns income of $25,000 in 2017 and $30,000 in 2018. Lincoln Company declares a 25-cent per-share cash dividend on December 22, 2018, payable January 12, 2019, to stockholders of record on December 30, 2018.
During 2018, Lincoln sells merchandise costing $10,000 to Tucker for $15,000. Twenty percent of the merchandise is still in Tucker’s ending inventory on December 31, 2018. The fair value of the investment is $135,000 on December 31, 2017, and $145,000 on December 31, 2018.