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Cayman Inc. bought 30% of Maya Company on January 1, 2018 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, 2018 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 Maya | Transfer Price | Amount Held by Cayman at Year-End | |||
2018 | $ | 30,000 | $ | 45,000 | $9,000 |
2019 | $ | 48,000 | $ | 80,000 | 20,000 |
Maya reported net income of $100,000 in 2018 and $120,000 in 2019 while paying $40,000 in dividends each year. What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2018? | |||||
Select one:
A.
$9,000.
B.
$4,500.
C.
$6,000.
D.
$900.
E.
$3,000.
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