Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2020, for $762,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $2.30 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 to Steinbart Transfer Price Amount Held by Alex at Year-End (at transfer price) 2020 $202,160 $266,000 $66,500 2021 117,990 171,000 52,000 Inventory held at the end of one year by Alex is sold at the beginning of the next. Steinbart reports net income of $95,500 in 2020 and $130,300 in 2021 and declares $30,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2021?
Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2020, for $762,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $2.30 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 to Steinbart Transfer Price Amount Held by Alex at Year-End (at transfer price) 2020 $202,160 $266,000 $66,500 2021 117,990 171,000 52,000 Inventory held at the end of one year by Alex is sold at the beginning of the next. Steinbart reports net income of $95,500 in 2020 and $130,300 in 2021 and declares $30,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2020, for $762,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $2.30 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 to Steinbart | Transfer Price | Amount Held by Alex at Year-End (at transfer price) |
| 2020 | $202,160 | $266,000 | $66,500 |
| 2021 | 117,990 | 171,000 | 52,000 |
Inventory held at the end of one year by Alex is sold at the beginning of the next.
Steinbart reports net income of $95,500 in 2020 and $130,300 in 2021 and declares $30,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2021?
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