Alex, Incorporated, buys 30 percent of Steinbart Company on January 1, 2023, for $599,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $1.65 million. Any excess of cost over book value is attributable to a trade name with a 20-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows:YearCost to SteinbartTransfer PriceAmount Held by Alex at Year-End (at transfer price)2023$ 171,760$ 226,000$ 56,5002024118,320174,00053,000The inventory held at the end of one year by Alex is sold at the beginning of the next.Steinbart reports net income of $104,500 in 2023 and $139,300 in 2024 and declares $20,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2024?

An equity investment defined :- It is invested in a company by procurement of stocks of that company…

Answered: Steinbart reports net income of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Alex, Incorporated, buys 30 percent of Steinbart Company on January 1, 2023, for $599,000. The equity method of accounting is to be used. Steinbart’s net assets on that date were $1.65 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	Cost to Steinbart	Transfer Price	Amount Held by Alex at Year-End (at transfer price)
2023	$ 171,760	$ 226,000	$ 56,500
2024	118,320	174,000	53,000

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

Steinbart reports net income of $104,500 in 2023 and $139,300 in 2024 and declares $20,000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2024?

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