Compute the amount of unrealized intra-entity inventory

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Acker Inc. bought 40% of Howell Co. on January 1, 2010 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows:

2010:Cost to Acker: $55,000. Transfer price:$75,000. Amount hold by Howell at year-end : $15,000.

2011:Cost to Acker: $70,000. Transfer price:$110,000. Amount hold by Howell at year-end : $55,000.

How well reported net income of $100,000 in 2010 and $120,000 in 2011 while paying $40,000 in dividends each year.

Calculate the amount of unrealized intra-entity inventory profit to be deferred on December 31, 2010 and 2011?

Reference no: EM13126968

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