Homework Answers
Answer ; $41,600
Explanation:
Unrealized intra-entity inventory profit for 2020
= (Transfer price - Cost to Acker) * (Amt. held by Howell at year end / Transfer price) * 40 %
= (75,000 - 55,000) * (15,000 / 75,000) * 40 %
= 20,000 * 0.20 * 40% = $1,600 deffered inventory profit
Unrealized intra-entity inventory profit for 2021
= (110,000 - 70,000) * (55,000 / 110,000) * 40%
= 40,000 * 0.50 * 40% = $8,000
Equity in Howell Income that should be reported by Acker in 2021
| Portion of Net income (120,000 * 40 %) | 48,000 |
| Add: Deffered inventory profit of 2020 (now recognized) | 1,600 |
| Less: Deffered inventory profit of 2021 (Unrecognized) | (8,000) |
| Equity in Howell Income that should be reported by Acker in 2021 | $41,600 |
:
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