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On January 1, Year 1. Investor, Inc. acquired 40% of the outstanding common stock of Investee Co, for $530,000. Investee's net assets on that date
On January 1, Year 1. Investor, Inc. acquired 40% of the outstanding common stock of Investee Co, for $530,000. Investee's net assets on that date totaled $1.2 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Investee immediately began supplying inventory to Investor as follows: Year Year Year 2 Transfer Price $100,000 $150,000 Cost to Investec $70,000 $96,000 Amount Held by Investor at Year-End (at Transfer Price) $25,000 $45,000 Inventory held at the end of one year is sold at the beginning of the next. Investee reported net income of $80,000 in Year 1 and $110,000 in Year 2. Investee paid dividends of $30,000 in each of the two years. Investor uses the equity method of accounting for this investment. A. Compute the amount of Investment Income to be reported: ... on the Year 1 Income Statement: S ... on the Year 2 Income Statement: S B. Compute the balance of the investment account on the balance sheet: ... at 12-31-Year 1: ... at 12-31-Year 2: _
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