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Equity method of accounting with intercompany inventory transactions An investor company owns 25% of the common stock of an investee company. The investor has significant influence over the investee, and acquired its equity interest in the investee on january 1 2021 for $1,323,000. On the date of acquisition, the investee's stockholders' equity was $5,292,000 and the fair values of the investee's individual net assets were equal to their reported book values During the year ended December 31, 2021, the investee reported net income of $126,000 and dividends of $25,200. During the year ended December 31, 2022, the investee reported net income of $151,200 and dividends of $ 37,800 The investor routinely sells inventory to the investee at a 30% profit margin. At December 31, 2021 and 2022, the investee held inventories purchased from the investor for $75,600 and $100,800 respectively. (All of these inventories on hand at the end of the year are sold by the investee to unaffiliated companies in the next period.) What amount of investment income from the investee did the investor recognize during the year ended December 31, 2022 Select one: a$39,690 b$35,910 $ 37,800 $43,470

Equity method of accounting with intercompany inventory transactions An investor company owns 25% of the common stock of an investee company. The investor has significant influence over the investee, and acquired its equity interest in the investee on january 1 2021 for $1,323,000. On the date of acquisition, the investee's stockholders' equity was $5,292,000 and the fair values of the investee's individual net assets were equal to their reported book values During the year ended December 31, 2021, the investee reported net income of $126,000 and dividends of $25,200. During the year ended December 31, 2022, the investee reported net income of $151,200 and dividends of $ 37,800 The investor routinely sells inventory to the investee at a 30% profit margin. At December 31, 2021 and 2022, the investee held inventories purchased from the investor for $75,600 and $100,800 respectively. (All of these inventories on hand at the end of the year are sold by the investee to unaffiliated companies in the next period.) What amount of investment income from the investee did the investor recognize during the year ended December 31, 2022 Select one: a$39,690 b$35,910 $ 37,800 $43,470

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
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Equity method of accounting with intercompany inventory transactions An investor company owns 25% of the common stock of an investee company. The investor has significant influence over the investee, and acquired its equity interest in the investee on january 1 2021 for $1,323,000. On the date of acquisition, the investee's stockholders' equity was $5,292,000 and the fair values of the investee's individual net assets were equal to their reported book values During the year ended December 31, 2021, the investee reported net income of $126,000 and dividends of $25,200. During the year ended December 31, 2022, the investee reported net income of $151,200 and dividends of $ 37,800 The investor routinely sells inventory to the investee at a 30% profit margin. At December 31, 2021 and 2022, the investee held inventories purchased from the investor for $75,600 and $100,800 respectively. (All of these inventories on hand at the end of the year are sold by the investee to unaffiliated companies in the next period.) What amount of investment income from the investee did the investor recognize during the year ended December 31, 2022 Select one: a$39,690 b$35,910 $ 37,800 $43,470
Transcribed Image Text:Equity method of accounting with intercompany inventory transactions An investor company owns 25% of the common stock of an investee company. The investor has significant influence over the investee, and acquired its equity interest in the investee on january 1 2021 for $1,323,000. On the date of acquisition, the investee's stockholders' equity was $5,292,000 and the fair values of the investee's individual net assets were equal to their reported book values During the year ended December 31, 2021, the investee reported net income of $126,000 and dividends of $25,200. During the year ended December 31, 2022, the investee reported net income of $151,200 and dividends of $ 37,800 The investor routinely sells inventory to the investee at a 30% profit margin. At December 31, 2021 and 2022, the investee held inventories purchased from the investor for $75,600 and $100,800 respectively. (All of these inventories on hand at the end of the year are sold by the investee to unaffiliated companies in the next period.) What amount of investment income from the investee did the investor recognize during the year ended December 31, 2022 Select one: a$39,690 b$35,910 $ 37,800 $43,470
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