Question
Cayman Inc. bought 30% of Maya Company on January 1, 2018 for $450,000. The equity method...
Cayman Inc. bought 30% of Maya Company on January 1, 2018 for $450,000. The equity method of accounting was used. The book value and fair value of the net assets of Maya on that date were $1,500,000. Maya began supplying inventory to Cayman as follows:
| Cost to Maya | Transfer Price | Amount Held by Cayman at Year-End | ||||||
| 2018 | $ | 30,000 | $ | 45,000 | $9,000 | |||
| 2019 | $ | 48,000 | $ | 80,000 | 20,000 | |||
Maya reported net income of $100,000 in 2018 and $120,000 in 2019 while paying $40,000 in dividends each year.
1. What is the Equity in Maya Income that should be reported by Cayman in 2018?
2. What is the balance in Cayman’s Investment in Maya account at December 31, 2018?
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