Delta Corporation acquired 25% of the voting stock of Davidson Company in 2019. There were no basis differences. It is now 2020. Davidson reported 2020 net income of $5,000,000, other comprehensive income of $100,000, and declared and paid cash dividends of $1,500,000. Delta's ending inventory contains $1,020,000 purchased from Davidson, and its beginning inventory contains $750,000 purchased from Davidson. Davidson sells inventory to Delta at a markup of 20% on cost. Delta uses the equity method to account for its investment in Davidson.
Required a. Calculate equity in net income of Davidson, reported on Delta's 2020 income statement.
b. Prepare Delta's 2020 journal entry or entries related to its investment in Davidson.
c. What is the net effect of the investment in Davidson on Delta's 2020 net income and on Delta's 2020 comprehensive income?

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The Answer of Delta Corporation acquired 25% of the voting stock of Davidson Company in 2019. There were no basis differences. It is now 2020. Davidson reported 2020 net income of $5,000,000, other comprehensive income of $100,000, and declared and paid cash dividends of $1,500,000. Delta's ending inventory contains $1,020,000 purchased from Davidson, and its beginning inventory contains $750,000 purchased from Davidson. Davidson sells inventory to Delta at a markup of 20% on cost. Delta uses the equity method to account for its investment in Davidson.
Required a. Calculate equity in net income of Davidson, reported on Delta's 2020 income statement.
b. Prepare Delta's 2020 journal entry or entries related to its investment in Davidson.
c. What is the net effect of the investment in Davidson on Delta's 2020 net income and on Delta's 2020 comprehensive income?

Delta Corporation Acquired 25% of the Voting Stock of Davidson