Cayman Inc Maya Reported Net Income of $100,000 in 2013 and $120,000

question 54

Multiple Choice

Cayman Inc. bought 30% of Maya Company on January 1, 2013 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: $\begin{array}{llll}& \text { Cost to } & \text { Transfer } & \text { Amount Held by } \\\text { Year } & \text { Maya } & \text { Price } & \text { Cayman at Year-End }\\\hline2013 & \$ 30,000 & \$ 45,000 & \$ 9,000 \\2014 & \$ 48,000 & \$ 80,000 & \$ 20,000\end{array}$ Maya reported net income of $100,000 in 2013 and $120,000 in 2014 while paying $40,000 in dividends each year. What is the Equity in Maya Income that should be reported by Cayman in 2013?

• A)$17,100.
• B)$18,000.
• C)$25,500.
• D)$29,100.
• E)$30,900.

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Definitions:

Trade-Off

The concept of sacrificing one aspect or feature in order to gain another, often used in discussions of decision-making where competing objectives must be balanced.

Timeliness

The characteristic of being done or occurring at a favorable or useful time, especially in the context of decision-making or business operations.

Accuracy

The degree to which the result of a measurement, calculation, or specification conforms to the correct value or a standard.

Future Event

An occurrence or situation that is expected to happen at a future date, often considered in planning and forecasting.