Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2020, for $996,000. The equity method of accounting is to be used. Steinbarts net assets on that date were $3.10 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	$111,520	$136,000	$34,000
2021	157,320	207,000	64,000

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

Steinbart reports net income of $82,750 in 2020 and $113,150 in 2021 and declares $20,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2021?

Multiple Choice

• $23,893.

• $38,673.

• $42,273.

• $27,873.