Alex, Inc., buys 40 percent of Steinbart Company on January 1, 2008, for $530,000. The equity method

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Alex, Inc., buys 40 percent of Steinbart Company on January 1, 2008, for $530,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $1.2 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Steinbart im¬ mediately begins supplying inventory to Alex as follows:

Amount Held by Alex at Year-End Year Cost to Steinbart Transfer Price

(at Transfer Price)

2008

$70,000

$100,000

$25,000 2009 96,000 150,000 45,000 Inventory held at the end of one year by Alex is sold at the beginning of the next.

Steinbart reports net income of $80,000 in 2008 and $110,000 in 2009 while paying $30,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2009?

a. $34,050.

b. $38,020.

c. $46,230.

d. $51,450.

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Advanced Accounting

ISBN: 9780073379456

9th Edition

Authors: Joe Ben Hoyle, Timothy S. Doupnik, Thomas F. Schaefer, Oe Ben Hoyle

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