Monroe Company owns 40% of the voting stock of Nartal Industries, acquired at book value. Nartal reports income of $600,000 for 2020. Nartal regularly sells merchandise to Monroe at a markup of 30% on cost. Monroe's 2020 beginning inventory includes $156,000 purchased from Nartal. Its 2020 ending inventory includes $260,000 purchased from Nartal. Monroe uses the equity method to report its investment in Nartal. Equity in net income of Nartal for 2020 is:

Question

Quizplus · Accepted Answer

40% x [$600,000 + ($156,000 - ($156,000/1.3)) - ($260,000 - ($260,000/1.3))] = $230,400

Monroe Company Owns 40% of the Voting Stock of Nartal