Matthew, Incorporated owns 30 percent of the outstanding stock of Lindman Company and has the ability to significantly influence theinvestee's operation and decision making. On January 1, 2024, the balance in the Investment in Lindman account is $409,000.Amortization associated with this acquisition is $11,400 per year. In 2024, Lindman earns an income of $83,000 and declares cashdividends of $41,500. Previously, in 2023, Lindman had sold inventory costing $50,400 to Matthew for $72,000. Matthew consumed allbut 25 percent of this merchandise during 2023 and used the rest during 2024. Lindman sold additional inventory costing $59,400 toMatthew for $90,000 in 2024. Matthew did not consume 40 percent of these 2024 purchases from Lindman until 2025.Matthew Incorporated ownership in LindmanMatthew Investment in LindmanAmortizationLindman 2024 IncomeLindman 2024 DividendsLindman Inventory Sales to Matthew2023 Inventory Sale2024 Inventory SaleGross Profit CalculationsSalesCostGross ProfitGross Profit Percentage30%409,00011,40083,00041,500Equity Income Calculation 2024Matthew's share of Lindman's reported net incomeAmortizationIntra-entity profit recognized on 2023 transferIntra-entity profit deferred on 2024 transferEquity income recognized by Matthew in 2024SaleRequired:question. Formulas for any items to be subtracted must return negativevalues.72,00090,000Investment in Lindman, 1/1/24Equity income - 2024Dividends - 2024Investment in Lindman, 12/31/24a. What amount of equity method income would Matthew recognize in 2024 fromits ownership interest in Lindman?Cost202350,40059,4002024Inventory Held atEnd of Yearb. What is the equity method balance in the Investment in Lindman account at the end of 2024?25%40%

The equity method is one of the methods that is used to record the investment made by one company to…

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a. What amount of equity method income would Matthew recognize in 2024 from its ownership interest in Lindman?

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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