Acker Inc Bought 40% of Howell Co

question 100

Multiple Choice

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:

Howell reported net income of $100,000 in 2010 and $120,000 in 2011 while paying $40,000 in dividends each year.
What is the Equity in Howell Income that should be reported by Acker in 2010?

• A) $10,000.
• B) $24,000.
• C) $36,000.
• D) $38,400.
• E) $40,000.

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