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Matthew, Inc. owns 30 percent of the outstanding stock of Lindman Company and has the ability...

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Accounting

Matthew, Inc. owns 30 percent of the outstanding stock ofLindman Company and has the ability to significantly influence theinvestee’s operations and decision making. On January 1, 2018, thebalance in the Investment in Lindman account is $409,000.Amortization associated with this acquisition is $11,400 per year.In 2018, Lindman earns an income of $83,000 and declares cashdividends of $41,500. Previously, in 2017, Lindman had soldinventory costing $50,400 to Matthew for $72,000. Matthew consumedall but 25 percent of this merchandise during 2017 and used therest during 2018. Lindman sold additional inventory costing $59,400to Matthew for $90,000 in 2018. Matthew did not consume 40 percentof these 2018 purchases from Lindman until 2019.

  1. What amount of equity method income would Matthew recognize in2018 from its ownership interest in Lindman?

  2. What is the equity method balance in the Investment in Lindmanaccount at the end of 2018?

a. Equity income

b.Investment in Lindman account.

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