Monroe Company owns 40% of the voting stock of Nartal Industries, acquired at book value. Nartal...
- Monroe Company owns 40% of the voting stock of Nartal
Industries, acquired at book value. Nartal reports income of
$600,000 for 2020. Nartal regularly sells merchandise to Monroe at
a markup of 30% on cost. Monroe's 2020 beginning inventory includes
$156,000 purchased from Nartal. Its 2020 ending inventory includes
$260,000 purchased from Nartal. Monroe uses the equity method to
report its investment in Nartal.
Equity in net income of Nartal for 2020 is:
|
A. |
$216,000 |
|
B |
$230,400 |
|
|
C. |
$264,000 |
|
|
D. |
$249,600 |
|
Homework Answers
Answer : Option B ; 230,400
Explanation;
40 % × [$600,000 + ( $ 156,000 - ($156,000/1.3)] - [ $260,000 - ($260,000 / 1.3 )]
= 40 % × ($600,000 + $ 36,000 ) - ($ 260,000 - $200,000 )
=40% × $636,000 - $60,000
=40% × $576,000
= $ 230,400
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Monroe Company owns 40% of the voting stock of Nartal
Industries, acquired at book value. Nartal...
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