Cayman Inc. bought 30% of Maya Company on January 1, 2013 for $450,000. The equity method of accounting was used. The book value and fair value of the net assets of Maya on that date were $1,500,000. Maya began supplying inventory to Cayman as follows:

Year	Cost to Maya	Transfer Price	Amount Held by Cayman at Year-End
2013	$30,000	$45,000	$9,000
2014	$48,000	$80,000	$20,000

Maya reported net income of $100,000 in 2013 and $120,000 in 2014 while paying $40,000 in dividends each year.

1) What is the amount of unrealized intra-entity inventory profit to be deferred on December 31, 2013?

A. $900

B. $3,000

C. $4,500

D. $6,000

E. $9,000

2) What is the amount of unrealized inventory profit to be deferred on December 31, 2014?

A. $1,500

B. $2,400

C. $3,600

D. $4,000

E. $8,000

Answer rating: 100% (QA)

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