Solution to be solve using Excel

Elwood, Inc. acquires 35% of the outstanding voting shares of Jake, Inc. on January 1, 2018, for $450,000, which gives Elwood the ability to significantly influence Jake. Jake has a net book value of $1,000,000 at January 1, 2018. Jakes asset and liability accounts showed carrying amounts considered equal to fair values except for a copyright whose value accounted for Elwoods excess cost over book value in its 35% purchase. The copyright had a remaining life of 10 years at January 1, 2018. No goodwill resulted from Elwoods share of the purchase.

Jake reported net income of $300,000 in 2018 and $320,000 of net income during 2019. Dividends of $110,000 and $140,000 are declared and paid in 2018 and 2019, respectively. Elwood uses the equity method.

Required:

1. On its 2019 comparative income statements, how much income would Elwood report for 2018 and 2019 in connection with the companys investment in Jake?
2. If Elwood sells its entire investment in Jake on January 1, 2020, for $800,000 cash, what is the impact on Elwoods income?
3. Assume that Elwood sells inventory to Jake during 2018 and 2019 as follows:

Year	Cost to Elwood	Price to Jake	Year-end Balance (at transfer price)
2018	$40,000	$50,000	$20,000 (sold the following year)
2019	$46,000	$58,000	$30,000 (sold the following year)

What amount of equity income should Elwood recognize for the year ending in 2019?