2.99 See Answer

Question: On January 1, 2021, Pine Company owns

On January 1, 2021, Pine Company owns 40 percent (40,000 shares) of Seacrest, Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been properly applied, and the carrying amount of the investment account as of January 1, 2021, is $293,600. Excess patent cost amortization of $12,000 is still being recognized each year. During 2021, Seacrest reports net income of $342,000 and a $120,000 other comprehensive loss, both incurred uniformly throughout the year. No dividends were declared during the year. Pine sold 8,000 shares of Seacrest on August 1, 2021, for $93,000 in cash. However, Pine retains the ability to significantly influence the investee.
During the last quarter of 2020, Pine sold $50,000 in inventory (which it had originally purchased for only $30,000) to Seacrest. At the end of that fiscal year, Seacrest’s inventory retained $10,000 (at sales price) of this merchandise, which was subsequently sold in the first quarter of 2021.
On Pine’s financial statements for the year ended December 31, 2021, what income effects would be reported from its ownership in Seacrest?


See Answer