Solution-What is the equity income in Steinbart to be

What is the equity income in Steinbart to be reported

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Reference no: EM132532025

Question - Alex, Inc., buys 40 percent of Steinbart Company on January 1, 2017, for $530,000. The equity method of 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-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows:

Year - 2017

Cost to Steinbart - $70,000

Transfer price - $100,000

Amount held by Alex at year-end (at transfer price) - $25,000

Year - 2018

Cost to Steinbart - $96,000

Transfer price - $150,000

Amount held by Alex at year-end (at transfer price) - $45,000

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

Steinbart reports net income of $80,000 in 2017 and $110,000 in 2018 and declares $30,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2018?

Reference no: EM132532025

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What is the equity income in Steinbart to be reported

Reference no: EM132532025

Reference no: EM132532025

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