Lauralee, Inc. owns a 30% interest in Eastwood Co., giving it representation on the investees...
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Accounting
Lauralee, Inc. owns a 30% interest in Eastwood Co., giving it representation on the investees board of directors. At the beginning of the year, the Equity Investment was carried on Lauralees balance sheet at $500,000. During the year, Eastwood reported net income of $250,000 and paid Lauralee a dividend of $50,000. In addition, Lauralee sold inventory to Eastwood, recording a gross profit of $20,000 on the sale. At the end of the year, 50% of the merchandise remained unsold by Eastwood.
Required:
Prepare the equity method journal entry to defer the unrealized inventory gross profit.
How much equity income should Lauralee report from Eastwood during the year?
What is the balance in the Equity Investment at the end of the year?
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