Question
Huge owns 25% of Small and at January 1, 2020 has a balance in its Investment in Small of $400,000. Huge has significant influence. In
Huge owns 25% of Small and at January 1, 2020 has a balance in its Investment in Small of $400,000. Huge has significant influence.
In 2020 Huge sells inventory (cost $60,000) to Small for $80,000. At the end of 2020, 30% of the inventory remains unsold. Small sells all the remaining inventory to third parties in 2021.
During 2021, Huge sells inventory (cost $80,000) to Small for $100,000, with 60% of this inventory being sold by Small to third parties in 2021. Small sells all the remaining inventory to third parties in 2022.
In 2021 Small reported $90,000 of net income and paid dividends of $20,000. What is the amount of Equity Income recognized in 2021 ?
$22,000 | ||
$23,000
| ||
$26,000
| ||
$18,000 | ||
$22,500
|
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