Computing income from the investee under equity method

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Lindy Corporation owns a 40% interest in Belair Company, acquired several years ago at a cost equal to book value and fair value. Belair sells merchandise to Lindy for the first time in 2003. In computing income from the investee for 2003 under the equity method, Lindy uses the following equation:

A-40% of Belair's income less 100% of the unrealized profit in Lindy's ending inventory.

B-40% of Belair's income plus 100% of the unrealized profit in Lindy's ending inventory.

C-40% of Belair's income less 40% of the unrealized profit in Lindy's ending inventory.

D-40% of Belair's income plus 40% of the unrealized profit in Lindy's ending inventory.

Reference no: EM13132092

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