Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee's operations and decision making.

Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has

the ability to significantly influence the investee's operations and decision making. On

January 1, 2018, the balance in the Investment in Lindman account is $341,000.

Amortization associated with this acquisition is $17,400 per year. In 2018, Lindman

earns an income of $159,000 and declares cash dividends of $53,000. Previously, in

2017, Lindman had sold inventory costing $47,200 to Matthew for $59,000. Matthew

consumed all but 25 percent of this merchandise during 2017 and used the rest during

2018. Lindman sold additional inventory costing $60,800 to Matthew for $80,000 in

2018. Matthew did not consume 40 percent of these 2018 purchases from Lindman

until 2019.

a. What amount of equity method income would Matthew recognize in 2018 from its

ownership interest in Lindman?

b. What is the equity method balance in the Investment in Lindman account at the end

of 2018?

a. Equity income

b. Investment in Lindman account

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting Reporting and Analysis

Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach

3rd edition

9781337909402, 978-1337788281

More Books

Students also viewed these Accounting questions