Reference no: EM132624455

Question - On January 1, 2019, Florida Corp. acquired 40% of Miami Corp.'s common stock for $700,000 paid in cash. This investment gave Florida Corp. significant influence over Miami Corp. Miami's net assets on that date were $1.5 million. A trademark held by Miami having a $200,000 book value was actually worth $350,000. This trademark has a 20-year life remaining.

Miami immediately begins supplying inventory to Florida as follows:

Year Cost to Miami Corp. Transfer price Amount held by Florida Corp. at year-end

2019 80,000 100,000 25,000

2020 90,000 150,000 45,000

Assume all inventory held at the end of the year by Florida Corp. is sold at the beginning of the following year.

Miami Corp. reports net income of $85,000 in 2019 and $210,000 in 2020 while paying $50,000 in dividends each year.

Required -

1. What is the balance of Florida Corp.'s Investment in Miami Corp. at December 31, 2019?

2. What is the Equity in Investee Income in Miami Corp. to be reported by Florida Corp. in 2019?

3. What is the balance of Florida Corp.'s Investment in Miami Corp. at December 31, 2020?

4. What is the Equity in Investee Income in Miami to be reported by Florida in 2020?