Question
Cayman Inc. bought 30% of Maya Company on January 1, 2013 for $450,000. The equity method of accounting was used. The book value and fair
Cayman Inc. bought 30% of Maya Company on January 1, 2013 for $450,000. The equity method of accounting was used. The book value and fair value of the net assets of Maya on that date were $1,500,000. Maya began supplying inventory to Cayman as follows:
|
| Cost to |
| Transfer |
| Amount Held by |
Year |
| Maya |
| Price |
| Cayman at Year-End |
2013 |
| $30,000 |
| $45,000 |
| $ 9,000 |
2014 |
| $48,000 |
| $80,000 |
| $20,000 |
Maya reported net income of $100,000 in 2013 and $120,000 in 2014 while paying $40,000 in dividends each year.
What is the amount of unrealized intra-entity inventory profit to be deferred on December 31, 2013?
A) $ 900.
B) $3,000.
C) $4,500.
D) $6,000.
E) $9,000.
What is the amount of unrealized inventory profit to be deferred on December 31, 2014?
A) $1,500.
B) $2,400.
C) $3,600.
D) $4,000.
E) $8,000.
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