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Discuss what is the investment in steinbart balance

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Question:

Alex Inc, buys 40 percent of Steinbart Company on January 1, 2014, for $530,000. The equity method accounting is to be used. Steinbart's net assets on that date were $1.2 million. Any excess of cost over book value is attributable to a trade name with a 20 years remaining life, Steinbart immediately begins supplying inventory to Alex as follows:

Year Cost to Steinbart Transfer Price Amnt Hld at yr end (trsfr price)

2014 $70,000   $100,000 $25,000

2015 96,000   150,000 45,000

Inventory held at end of one year by Alex is sold at the beginning of the next.

Steinbart reports net income of $80,000 in 2014 and $110,000 in 2015 while paying $30,000 in dividends each year. What is the investment in Steinbart balance (equity method) in Alex records in 2014 & 2015?

 

Reference no: EM131817893

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