Assume that an investor owns 30% of an investee, and accounts for its investment using the equity method. At the beginning of th

Question

2 years ago

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Assume that an investor owns 30% of an investee, and accounts for its investment using the equity method. At the beginning of th

e year, the Equity Investment was reported on the investor's balance sheet at $300,000. During the year, the investee reported net income of $114,000 and paid dividends of $20,000 to the investor. In addition, the investor sold inventory to the investee, realizing a gross profit of $48,000 on the sale. At the end of the year, 20% of the inventory remained unsold by the investee.
Required:
a. How much equity should the investor report for the year?
b. What is the balance of the Equity Investment at the end of the year?

Business

1 answer:

Vladimir [108] · Answer 1 · 2023-05-04T04:57:22+03:00

Assume that an investor owns 30% of an investee, and accounts for its investment using the equity method. At the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $300,000. During the year, the investee reported net income of $114,000 and paid dividends of $20,000 to the investor. In addition, the investor sold inventory to the investee, realizing a gross profit of $48,000 on the sale. At the end of the year, 20% of the inventory remained unsold by the investee.