Equity Method Investment with Intercompany Sales

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 2022. Coca-Cola FEMSA regularly sells canned beverages to Coca-Cola at a markup of 35 percent on cost. During 2022 Coca-Cola FEMSAs sales to Coca-Cola totaled $25 million. Coca-Colas January 1, 2022, inventories include $1,350,000 purchased from Coca-Cola FEMSA. Coca-Colas December 31, 2022, inventories include $1,215,000 purchased from Coca-Cola FEMSA.

Required

Prepare the 2022 journal entry on Coca-Cola's books to recognize its income from Coca-Cola FEMSA under the equity method.