Alex, Inc., buys 40 percent of Steinbart Company on January 1,2012, for $530,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $1.2 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 of Steinbart | Transfer Price | Amount Held by Alex at Year-End (at transfer price) |
2012 | $ 70,000 | $ 100,000 | $25,000 |
2013 | 96,000 | 150,000 | 45,000 |
Inventory held at the end of one year by Alex is sold at the beginning of the next.
Steinbart reports net income of $80,000 in 2012 and $110,000 in 2013 while paying $30,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2013?
a. $34,050.
b. $38,020.
c. $46,230.
d. $51,450.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.