Question
Matthew, Incorporated, owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investees operations and decision making.
Matthew, Incorporated, 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, 2024, the balance in the Investment in Lindman account is $385,000. Amortization associated with this acquisition is $17,500 per year. In 2024, Lindman earns an income of $115,500 and declares cash dividends of $38,500. Previously, in 2023, Lindman had sold inventory costing $32,800 to Matthew for $41,000. Matthew consumed all but 30 percent of this merchandise during 2023 and used the rest during 2024. Lindman sold additional inventory costing $45,600 to Matthew for $60,000 in 2024. Matthew did not consume 40 percent of these 2024 purchases from Lindman until 2025.
Please show Calculations, Thanks in advance
Matthew, Incorporated, 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, 2024, the balance in the Investment in Lindman account is $385,000. Amortization associated with this acquisition is $17,500 per year. In 2024 , Lindman earns an income of $115,500 and declares cash dividends of $38,500. Previously, in 2023 , Lindman had sold inventory costing $32,800 to Matthew for $41,000. Matthew consumed all but 30 percent of this merchandise during 2023 and used the rest during 2024. Lindman sold additional inventory costing $45,600 to Matthew for $60,000 in 2024 . Matthew did not consume 40 percent of these 2024 purchases from Lindman until 2025. Required: a. What amount of equity method income would Matthew recognize in 2024 from its ownership interest in Lindman? b. What is the equity method balance in the Investment in Lindman account at the end of 2024Step by Step Solution
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