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4. (25 pts) Martin purchased 80% of Lewis for $750,000 on January 1, 20x1. Martin's excess of cost over book value was $10,000. The excess due to undervalued equipment is to be amortized over four years.

During 20x1, Lewis sold inventory for a profit of $8,000 to Martin which is still in their inventory at December 31, 20x1. During 20x2,Lewis sold to Martin inventory costing $40,000 for $50,000.At year end, 25% of that inventory is still on hand inthe inventory of Martin.

Lewis reported income of $200,000 in 20X2.

For 20x2, using the equity method, record the profits from Lewis on the books of Martin.

Dr. Cr.