1) Compute the equity in earnings of Gargiulo reported on Posito's books for 2012, 2013, and 2014.

Gargiulo Company, a 90% owned subsidiary of Posito Corporation, sells inventory to Posito at a 25% profit on selling price. The following data are available pertaining to intra-entity purchases. Gargiulo was acquired on January 1, 2012. 2012 2013 2014 Purchases by Posito $8,000 $12,000 $15,000 Ending inventory on Posito's books 1,200 4,000 3,000 Assume the equity method is used. The following data are available pertaining to Gargiulo's income and dividends. 2012 2013 2014 Gargiulo's net income $70,000 $85,000 $94,000 Dividends paid by Gargiulo 10,000 10,000 15,000