Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2020, for $544,000. The equity method of accounting is to be used. Steinbarts net assets on that date were $1.50 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)
2020	$123,000	$164,000	$41,000
2021	145,530	220,500	68,500

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

Steinbart reports net income of $104,000 in 2020 and $137,300 in 2021 and declares $40,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2021?

Multiple Choice

• $27,768.

• $32,578.

• $42,178.

• $46,078.