Question
Equity method journal entries with intercompany sales of inventory Assume that an investor owns 30% of an investee, and accounts for its investment using the
Equity method journal entries with intercompany sales of inventory
Assume that an investor owns 30% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $400,000. During the year, the investee reported net income of $100,000 and paid dividends of $60,000 to the investor. In addition, the investor sold inventory to the investee, realizing a gross profit of $40,000 on the sale. At the end of the year, 15% of the inventory remained unsold by the investee.
What is the balance of the Equity Investment at the end of the year?
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