Matthew owns 30 percent of the outstanding stock of Lindman and has the ability

Question

Matthew owns 30 percent of the outstanding stock of Lindman and has the ability to significantly influence the investee's operations and decision making. On January 1, 2015, the balance in the Investment in Lindman account is $372,000. Amortization associated with this acquisition is $11,700 per year. In 2015, Lindman earns an income of $106,500 and declares cash dividends of $35,500. Previously, in 2014, of this merchandise during 2014 and used the rest during 2015. Lindman sold additional inventory costing $59,400 to Matthew for $90,000 in 2015. Matthew did not consume 40 percent of these 2015 purchases from Lindman until 2016. a. What amount of equity method income would Matthew recognize in 2015 from its ownership interest in Answer is complete but not entirely correct. Equity incomeS 34,0323 b. What is the equity method balance in the Investment in Lindman account at the end of 2015? Answer is complete but not entirely correct. Equity balance $404,332

Explanation / Answer

All amounts are in $ Net income recognised by matthew in 2015 Particulars Amount $ Amount $ Net income reported by Lindman for the year 2015 1,06,500.00 Share of net income for Matthew @ 30% (106500*30%)      31,950.00 Adjustment:Inter company transactions Add:Unrealised profit on opening stock (68000-47600)*25%      5,100.00 Less:Unrealised profit on closing stock (90000-59400)*40% -12,240.00       -7,140.00      24,810.00 Closing balance of equity Particulars Amount $ Value of investment as on 01 01 2015 3,72,000.00 Add:Net income from Lindman      24,810.00 Less:Amortization associated with acquisition    -11,700.00 Less:Dividend received (35500*30%)    -10,650.00 Value of investment as on 31 12 2015 3,97,860.00

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