Reference no: EM131870600

Question - Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2012, for $544,000. The equity method of accounting is to be used. Steinbarts net assets on that date were $1.5 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows:

Amount Held by Alex at Year-End

Year Cost to Steinbart Transfer Price (at Transfer Price)

2012 $123,000 $164,000 $41,000

2013 145,530 220,500 68,500

Inventory held at the end of one year by Alex is sold at the beginning of the next. Steinbart reports net income of $104,000 in 2012 and $137,300 in 2013 while paying $40,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2013?

a. $27768.

b. $46078.

c. $32578.

d. $42178.