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Equity Method Investment with Intercompany Sales and Profits The Coca-Cola Company owns 28 percent of the voting stock of Coca-Cola FEMSA, acquired at book value.

Equity Method Investment with Intercompany Sales and Profits The Coca-Cola Company owns 28 percent of the voting stock of Coca-Cola FEMSA, acquired at book value. Assume that Coca-Cola FEMSA reports income of $5 million for 2016. Coca-Cola FEMSA regularly sells canned beverages to Coca-Cola at a markup of 35 percent on cost. During 2016 Coca-Cola FEMSAs sales to Coca-Cola totaled $25 million. Coca-Colas January 1, 2016, inventories include $1,350,000 purchased from Coca-Cola FEMSA. Coca-Colas December 31, 2016, inventories include $1,215,000 purchased from Coca-Cola FEMSA. Required Prepare the 2016 journal entry on Coca-Cola's books to recognize its income from Coca-Cola FEMSA under the equity method

Investment in Cokeacola Femsa DR: 1,409,800

Equity in Net Income of Cokeacola Femsa CR:1,409,800

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