method of accounting is to be used. Steinbarts net assets on that date were $1.5 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:
Amount Held by Alex
Year Cost to Steinbart Transfer Price (at Transfer Price)
2012 $123,000 $164,000 $41,000
2013 145,530 220,500 68,500
Inventory held at the end of one year by Alex is sold at the beginning of the next.
Steinbart reports net income of $104,000 in 2012 and $137,300 in 2013 while paying $40,000 in
dividends each year. What is the equity income in Steinbart to be reported by Alex in 2013?
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