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Equity Method Investment with Intercompany Sales and Profits The Coca-Cola Company owns 21 percent of...

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Accounting

Equity Method Investment with Intercompany Sales and Profits

The Coca-Cola Company owns 21 percent of the voting stock of Coca-Cola FEMSA, acquired at book value. Assume that Coca-Cola FEMSA reports income of $3 million for 2013. Coca-Cola FEMSA regularly sells canned beverages to Coca-Cola at a markup of 20 percent on cost. During 2013 Coca-Cola FEMSA's sales to Coca-Cola totaled $15 million. Coca-Cola's January 1, 2013, inventories include $810,000 purchased from Coca-Cola FEMSA. Coca-Cola's December 31, 2013, inventories include $729,000 purchased from Coca-Cola FEMSA.

Prepare the 2013 journal entry on Coca-Cola's books to recognize its income from Coca-Cola FEMSA under the equity method.

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