Cayman Inc. bought 30% of Maya Company on January 1, 2021 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: Maya reported net income of $100,000 in 2021 and $120,000 in 2022 while paying $40,000 in dividends each year.What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2021?

Question

Cayman Inc. bought 30% of Maya Company on January 1, 2021 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:  Maya reported net income of $100,000 in 2021 and $120,000 in 2022 while paying $40,000 in dividends each year.What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2021?

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The Answer of Cayman Inc. bought 30% of Maya Company on January 1, 2021 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:  Maya reported net income of $100,000 in 2021 and $120,000 in 2022 while paying $40,000 in dividends each year.What is the investor's share of gross profit on intra-entity inventory sales that should be deferred on December 31, 2021?