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

Matthew, Inc., owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investees operations and decision making. On January 1, 2021, the balance in the Investment in Lindman account is $365,000. Amortization associated with this acquisition is $12,600 per year. In 2021, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2020, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of this merchandise during 2020 and used the rest during 2021. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2021. Matthew did not consume 40 percent of these 2021 purchases from Lindman until 2022.

  1. What amount of equity method income would Matthew recognize in 2021 from its ownership interest in Lindman?

  2. What is the equity method balance in the Investment in Lindman account at the end of 2021?

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a. Equity income b. Balance of investment in Lindman account

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