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Acker Inc. bought 40% of Howell Co. on January 1, 2017 for $576,000. The equity method of accounting was used. The book value and fair
Acker Inc. bought 40% of Howell Co. on January 1, 2017 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows:
Cost to Acker | Transfer Price | Amount Held by Howell at Year-End | ||||||
2017 | $ | 55,000 | $ | 75,000 | $15,000 | |||
2018 | $ | 70,000 | $ | 110,000 | $55,000 | |||
Howell reported net income of $100,000 in 2017 and $120,000 in 2018 while paying $40,000 in dividends each year.
What is the Equity in Howell Income that should be reported by Acker in 2017?
Multiple Choice
A $10,000.
B $24,000.
C $36,000.
D $38,400.
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