Equity Method - Unrealized Gains
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Bowler Inc. owns 30% of Yarby Co. and applies the equity method. During the current year, Bowler bought inventory costing $66,000 and then sold it to Yarby for $120,000. At year-end, only $24,000 of merchandise was still being held by Yarby. What amount of unrealized gain must be deferred by Bowler?
A) $ 6,480
B) $ 3,240
C) $10,800
D) $ 5,920
E) $ 6,610
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This solution helps calculate the unrealized gain must be deferred by a company. The explanation is given in 141 words and step by step calculations.
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Under equity method when investee's net assets increased because it earned income ,the investor increases its carrying amount of investment for its proportionate share of investee's increase in net assets.
Where merchandise is sold by investment company to investee and ...
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