Acker Inc. bought 40% of Howell Co. on January 1, 2017 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows: Cost to AckerTransfer PriceAmount Held by Howell at Year-End2017$55,000$75,000$15,0002018$70,000$110,000$55,000??Howell reported net income of $100,000 in 2017 and $120,000 in 2018 while paying $40,000 in dividends each year.?What is the Equity in Howell Income that should be reported by Acker in 2018?
A. $32,000.
B. $50,600.
C. $41,600.
D. $49,600.
E. $48,000.
Answer: C
Business
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