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Equity income in Steinbart to be reported by Alex

Alex, Inc, buys 40 percent of Steinbart Company on January 1, 2008 for $530000. The equity method of accounting is to be used. Steinbarts net assets on that date were $1.2 million. Any excess of cost over book value is attributable to trade name with a 20-year remaining life. Steinbart immediatlely begins suppling inventory to Alex as follows: Year Cost to Steinbart Transfer price Amount Held by Alex at Year-end (At transfer price)
2008 $70,000 $100,000 $25,000
2009 $96,000 $150,000 $45,000
Inventory held at the end of year by Alex is sold at the beginning of the next. Steinbart reports net income of $80000 in 2008 and $110000 in 2009 while paying $30000 in dividends each year. What is the equity income in Steinbart to be reported by Alex in 2009?

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Alex, Inc, buys 40 percent of Steinbart Company on January 1, 2008 for $530000. The equity method of accounting is to be used. Steinbart's net assets on that date were $1.2 million. Any excess of cost over book value is attributable to trade name with a 20-year remaining life. Steinbart immediately begins supplying inventory to Alex as follows: Year ...

Solution Summary

The expert examines equity income in Steinbart to be reported by Alex.

$2.19