BusinessCourse

Course Content $/$ Chapter $1/$ Chapter $1$ Homework

Chapter $1$ Homework

Assume that an investor owns $30\%$ or an investee, and accounts for its investment using the equity method. art the beginning of the year, the Equity Investment was reported on the investor's balance sheet at $$300,000.$ During the year. the investee reported net income of $$105,000$ and paid dividends of $$20,000$ to the investor. In addition, the investor sold inventory to the investee, realizing a gross profit of $$42,000$ on the sale. At the end of the year, $20\%$ of the inventory remained unsold by the investee.

a$.$ How much equity income should the investor report for the year?

Required

$$

b$.$ What is the balance of the Equity Investment at the end of the year?