(TCO A) Bend Inc. holds 25% of the outstanding voting shares of Calico Co. and appropriately applies the equity method of accounting. Amortization associated with this investment equals $9,000 per year. For 20X3, Calico reported earnings of $80,000 and paid cash dividends of $30,000. During 20X3, Calico acquired inventory for $57,600, which was then sold to Bend for $90,000. At the end of 20X3, Bend still held some of this inventory at its transfer price of $40,000. Required: (1) Determine the amount of intra-entity profit at the end of 20X3. (2) Determine the amount of Equity in Investee Income that Bend should have reported for 20X3.
(TCO A) Bend Inc. holds 25% of the outstanding voting shares of Calico Co. and appropriately applies the equity method of accounting. Amortization associated with this investment equals $9,000 per year. For 20X3, Calico reported earnings of $80,000 and paid cash dividends of $30,000. During 20X3, Calico acquired inventory for $57,600, which was then sold to Bend for $90,000. At the end of 20X3, Bend still held some of this inventory at its transfer price of $40,000. Required: (1) Determine the amount of intra-entity profit at the end of 20X3. (2) Determine the amount of Equity in Investee Income that Bend should have reported for 20X3.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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(TCO A) Bend Inc. holds 25% of the outstanding voting shares of Calico Co. and appropriately applies the equity method of accounting. Amortization associated with this investment equals $9,000 per year. For 20X3, Calico reported earnings of $80,000 and paid cash dividends of $30,000. During 20X3, Calico acquired inventory for $57,600, which was then sold to Bend for $90,000. At the end of 20X3, Bend still held some of this inventory at its transfer price of $40,000.
Required:
(1) Determine the amount of intra-entity profit at the end of 20X3.
(2) Determine the amount of Equity in Investee Income that Bend should have reported for 20X3.
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