Jager Inc. holds 30% of the outstanding voting shares of Kinson Co. and appropriately applies the equity method of accounting. Amortization associated with this investment equals $11,000 per year. For 2018, Kinson reported earnings of $100,000 and paid cash dividends of $40,000. During 2018, Kinson acquired inventory for $62,400, which was then sold to Jager for $96,000. At the end of 2018, Jager still held some of this inventory at its intra-entity selling price of $50,000.Required:Determine the amount of Equity in Investee Income that Jager should have reported for 2018.
What will be an ideal response?
| Equity in investee income: | |||
| Equity income accrual ($100,000 × 30%) | $ | 30,000 | |
| Deferral of share of intra-entity gross profit (below) | (5,250 | ) | |
| Amortization (given) | (11,000 | ) | |
| Equity in investee income | $ | 13,750 | |
? | |||
| Deferral of its share of intra-entity gross profit: | |||
| Remaining inventory - end of year | $ | 50,000 | |
| Gross profit percentage ($33,600 ÷ $96,000) | × | 35 | % |
| Profit within remaining inventory | $ | 17,500 | |
| Ownership percentage | × | 30 | % |
| Share of intra-entity gross profit | $ | 5,250 | |
You might also like to view...
When one or more writer can change the document text of a group member, what type of software tool is more likely being used?
A) Adobe Acrobat B) PDF file C) Spell check D) Change tracking E) Commenting
Properly programmed, the computer-administered approach guarantees a 75% reduction in interviewer errors
Indicate whether the statement is true or false
A fund that is the result of an agreement between a contributor and a government that the principal and/or income of trust assets is for the benefit of individuals, organizations, or other governments is a(n):
A. Pension Trust Fund. B. Investment Trust Fund. C. Private-Purpose Trust Fund. D. Agency fund.
What are the various kinds or sources of American law? Discuss how these various types of law interrelate to form the system of law in the United States