Acker Inc Bought 40% of Howell Co

question 41

Multiple Choice

Acker Inc. bought 40% of Howell Co. on January 1, 2020 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: Howell reported net income of $100,000 in 2020 and $120,000 in 2021 while paying $40,000 in dividends each year.What is Acker's share of the intra-entity inventory gross profit that should be deferred on December 31, 2021?

• A)$1,600.
• B)$8,000.
• C)$15,000.
• D)$20,000.
• E)$40,000.

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