Steven Company Owns 40% of the Outstanding Voting Common Stock

question 74

Essay

Steven Company owns 40% of the outstanding voting common stock of Nicole Corp. and has the ability to significantly influence the investee's operations. On January 3, 2013, the balance in the Investment in Nicole Corp. account was $503,000. Amortization associated with this acquisition is $12,000 per year. During 2013, Nicole earned net income of $120,000 and paid cash dividends of $40,000. Previously in 2012, Nicole had sold inventory costing $35,000 to Steven for $50,000. All but 25% of that inventory had been sold to outsiders by Steven during 2012. Additional sales were made to Steven in 2013 at a transfer price of $75,000 that had cost Nicole $54,000. Only 10% of the 2013 purchases had not been sold to outsiders by the end of 2013.
What amount of equity income would Steven have recognized in 2013 from its ownership interest in Nicole?

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Definitions:

Cultural Concepts

are the shared beliefs, norms, values, and practices that are learned and transmitted within a society, shaping its members' perspectives and behaviors.

Assertiveness

The quality of being self-assured and confident without being aggressive, enabling clear and effective communication.

Leader Attribute

Refers to the intrinsic traits, qualities, and characteristics that contribute to an individual's effectiveness as a leader.

Future Orientation

The extent to which individuals think about and plan for the future.