borgin inc. owns 30% of the outstanding voting common stock of burkes co. and has the ability to significantly influence the inv

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borgin inc. owns 30% of the outstanding voting common stock of burkes co. and has the ability to significantly influence the inv

estee’s operations and decision-making. on january 1, 2021, the balance in the investment in burkes co. account was $402,000. amortization associated with the purchase of this investment is $8,000 per year. during 2021, burkes earned income of $108,000 and paid cash dividends of $36,000. previously in 2020, burkes had sold inventory costing $28,800 to borgin for $48,000. all but 25% of this merchandise was consumed by borgin during 2020. the remainder was used during the first few weeks of 2021. additional sales were made to borgin in 2021; inventory costing $33,600 was transferred at a price of $60,000. of this total, 40% was not consumed until 2022. what amount of equity income would borgin have recognized in 2021 from its ownership interest in burkes?

Business

1 answer:

nordsb [41] · Answer 1 · 2023-09-19T03:38:33+03:00

The amount of equity income is mathematically given as

CI= $22,672

This is further explained below.

<h3> What amount of equity income would Borgin have recognized in 2021 from its ownership interest in burkes?</h3>

Generally, The amount of capital income that Borgin would realize in 2021 as a result of the company's ownership stake in Burkes

CI = [(108,000 × 0.30) – 8,000 + [(48,000 – 28,800) × 0.25 × 0.30) – [(60,000 – 33,600) × 0.40 × 0.30)

CI= 24,400 + 1,440 – 3,168

CI= $22,672

In conclusion, the amount of equity income

CI= $22,672