Problem 1-12 (LO 1-3, 1-4, 1-6)

Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2014, for $1,098,000. The equity method of accounting is to be used. Steinbarts net assets on that date were $3.30 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows:

Year	Cost to Steinbart	Transfer Price	Amount Held by Alex at Year-End (at Transfer Price)
2014	$156,200	$220,000	$55,000
2015	109,800	180,000	55,000

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

Steinbart reports net income of $100,000 in 2014 and $130,900 in 2015 and declares $40,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2015?

$40,320.

$32,220.

$47,220.

$27,870.