Problem 1. Delta acquired 40% of Gammas common shares on January 1, 2012 paying $630,000 in cash. This investment gives Delta significant influence over Gamma. Gammas net assets on that date were $1.2 million. A trademark held by Gamma having a $200,000 book value was actually worth $300,000. This trademark has a 20-year life remaining.

Gamma immediately begins supplying inventory to Delta as follows:

Year	Cost to Gamma	Transfer price	Amount held by Delta at the end of the year
2012	70,000	100,000	25,000
2013	96,000	150,000	45,000

Inventory held at the end of the year by Delta is sold at the beginning of the next year.

Gamma reports net income of $80,000 in 2012 and $110,000 in 2013 while paying $30,000 in dividends each year.

Required:

1. What is the balance of Deltas Investment in Gamma, at December 2012? (1 points)

2. What is the Equity income in Gamma to be reported by Delta in 2012? (1 points)

3. What is the balance of Deltas Investment in Gamma, at December 2013? (1 points)

4. What is the Equity Income in Gamma to be reported by Delta in 2013? (1 points)