Matthew, Incorporated, owns 30 percent of the outstanding stock of Lindman Company andhas the ability to significantly influence the investee's operations and decision making. OnJanuary 1, 2024, the balance in the Investment in Lindman account is $365,000. Amortizationassociated with this acquisition is $12,600 per year. In 2024, Lindman earns an income of$132,000 and declares cash dividends of $33,000. Previously, in 2023, Lindman had soldinventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent ofthis merchandise during 2023 and used the rest during 2024. Lindman sold additionalinventory costing $44,800 to Matthew for $80,000 in 2024. Matthew did not consume 40percent of these 2024 purchases from Lindman until 2025.Required:a. What amount of equity method income would Matthew recognize in 2024 from itsownership interest in Lindman?b. What is the equity method balance in the Investment in Lindman account at the end of2024?a. Equity incomeb. Balance of investment in Lindman account

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2018, the balance in the Investment in Lindman account is $365,000. Amortization associated with this acquisition is $12,600 per year. In 2018, Lindman earns an income of $132,000 and declares cash dividends of $33,000. Previously, in 2017, Lindman had sold inventory costing $33,600 to Matthew for $56,000. Matthew consumed all but 20 percent of this merchandise during 2017 and used the rest during 2018. Lindman sold additional inventory costing $44,800 to Matthew for $80,000 in 2018. Matthew did not consume 40 percent of these 2018 purchases from Lindman until 2019. What amount of equity method income would Matthew recognize in 2018 from its ownership interest in Lindman? What is the equity method balance in the Investment in Lindman account at the end of 2018?
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