6. Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2014, for $460,000. The equity method of accounting is to be used. Steinbarts net assets on that date were $1.30 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows:

Year	Cost to Steinbart	Transfer Price	Amount Held by Alex at Year-End (at Transfer Price)
2014	$73,440	$102,000	$25,500
2015	105,600	165,000	50,000

Inventory held at the end of one year by Alex is sold at the beginning of the next.

Steinbart reports net income of $90,750 in 2014 and $122,550 in 2015 and declares $20,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2015?

$25,337.

$40,207.

$46,207.

$30,007.

On May 1, Donovan Company reported the following account balances:

Current assets		$	136,500
Buildings & equipment (net)			237,500
Total assets		$	374,000
Liabilities		$	98,000
Common stock			150,000
Retained earnings			126,000
Total liabilities and equities		$	374,000

8. On May 1, Beasley paid $452,400 in stock (fair value) for all of the assets and liabilities of Donovan, which will cease to exist as a separate entity. In connection with the merger, Beasley incurred $23,300 in accounts payable for legal and accounting fees.

Beasley also agreed to pay $82,600 to the former owners of Donovan contingent on meeting certain revenue goals during the following year. Beasley estimated the present value of its probability adjusted expected payment for the contingency at $26,200. In determining its offer, Beasley noted the following:

	Donovan holds a building with a fair value $36,100 more than its book value.
	Donovan has developed unpatented technology appraised at $32,600, although is it not recorded in its financial records.
	Donovan has a research and development activity in process with an appraised fair value of $51,900. The project has not yet reached technological feasibility.
	Book values for Donovans current assets and liabilities approximate fair values.

What should Beasley record as total liabilities incurred or assumed in connection with the Donovan merger?

$23,300.

$150,000.

$147,500.

$121,300.