Question 5 Partially correct Mark 3.50 out of 10.00 Flag question Equity method journal entries with intercompany sales of inventory An investor owns 25% 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 $1,000,000. During the year, the investee reported net income of $400,000 and paid dividends of $100,000. In addition, the investor sold inventory to the investee, realizing a gross profit of $120,000 on the sale. At the end of the year, 30% of the inventory remained unsold by the investee. a. Provide the equity method journal entries required for the year Description Debit Credit Equity investment 100,000 Equity income 100,000 To record the recognition of equity income. Equity income 9,000 Equity investment 9,000 To record deferred profits in ending inventory. 91,000 x Equity investment 91,000 x To record receipt of dividends. 0 a 0 0 07 Cash 0 b. What is the balance of the Equity Investment at the end of the year? $ 991,000 C. Assume that the inventories are all sold in the following year, that the investee reports $450,000 of net income. How much equity income will the investor report for the following year? $ 121,500 Check