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Question 1 Not changed since last attempt Marked out of 1.43 Flag question eBook Print Equity method journal entries with intercompany sales of inventory
Question 1 Not changed since last attempt Marked out of 1.43 Flag question eBook Print Equity method journal entries with intercompany sales of inventory Assume that an investor owns 30% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $300,000. During the year, the investee reported net income of $112,000 and paid dividends of $20,000 to the investor. In addition, the investor sold inventory to the investee, realizing a gross profit of $46,000 on the sale. At the end of the year, 20% of the inventory remained unsold by the investee. Required a. How much equity income should the investor report for the year? $ 28,200 b. What is the balance of the Equity Investment at the end of the year? $ 368,200 c. Assume that the remaining inventory is sold in the following year and that the investee reports $150,000 of net income. How much equity income will the investor report for the following year? $ 46,800
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