Anderson acquires 10 percent of the outstanding voting shares of Barringer on January 1, 2013, for $92,000 and categorizes the investment as an available-for-sale security. An additional

20 percent of the stock is purchased on January 1, 2014, for $210,000, which gives

Anderson the ability to significantly influence Barringer. Barringer has a book value of $800,000 at January 1, 2013, and records net income of $180,000 for that year. Barringer declared and paid dividends of $80,000 during 2013. The book values of Barringers asset and liability accounts are considered as equal to fair values except for a copyright whose value accounted for Andersons excess cost in each purchase. The copyright had a remaining life of 16 years at January 1, 2013.

Barringer reported $210,000 of net income during 2014 and $230,000 in 2015. Dividends of $100,000 are declared and paid in each of these years. Anderson uses the equity method.

a. On its 2015 comparative income statements, how much income would Anderson report for

2013 and 2014 in connection with the companys investment in Barringer?

b. If Anderson sells its entire investment in Barringer on January 1, 2016, for $400,000 cash, what is the impact on Andersons income?

c. Assume that Anderson sells inventory to Barringer during 2014 and 2015 as follows:

Year Cost to Anderson Price to Barringer

Year-End Balance

(at transfer price)

2014 $35,000 $50,000 $20,000 (sold in following year)

2015 33,000 60,000 40,000 (sold in following year)

What amount of equity income should Anderson recognize for the year 2015?