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Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2012, for $544,000. The equity method of accounting is to be used. Steinbarts net...

This question was answered on Jan 14, 2013. View the Answer
Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2012, for $544,000. The equity
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
at Year-End
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?
a. $27768.
b. $46078.
c. $32578.
d. $42178.
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Alex, Inc., buys 30 percent of Steinbart Company on January 1, 2012, for $544,000. The equity
method of accounting is to be used. Steinbarts net assets on that date were $1.5 million. Any excess
of...

This question was asked on Jan 13, 2013 and answered on Jan 14, 2013.

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