Reference no: EM133058373

Question - Archie Company owns 40% of the outstanding voting common stock of Boris Corp. and has the ability to significantly influence the investee's operations. On January 3, 2021, the balance in the Investment in Boris Corp. account was $650,000. Amortization associated with this acquisition is $15,000 per year. During 2021, Boris earned net income of $150,000 and paid cash dividends of $50,000. Previously in 2020, Boris had sold inventory costing $77,000 to Archie for $110,000. All but 20% of that inventory had been sold to outsiders by Archie during 2020. Additional sales were made to Archie in 2021 at a transfer price of $120,000 that had cost Boris $90,000. Only 10% of the 2021 purchases had not been sold to outsiders by the end of 2021.

Required -

1. What amount of unrealized intra-entity inventory profit should be deferred by Archie at December 31, 2020?

2. What amount of unrealized intra-entity inventory profit should be deferred by Archie at December 31, 2021?

3. What amount of equity income would Archie have recognized in 2021 from its ownership in Boris?

4. What was the balance in the Investment in Boris Corp. account at December 31, 2021?