Belden, Inc. acquires 30 percent of the outstanding votingshares of Sheffield, Inc. on January 1, 2017, for $320,000, whichgives Belden the ability to significantly influence Sheffield.Sheffield has a net book value of $804,000 at January 1, 2017.Sheffield's asset and liability accounts showed carrying amountsconsidered equal to fair values except for a copyright whose valueaccounted for Belden's excess cost over book value in its 30percent purchase. The copyright had a remaining life of 16 years atJanuary 1, 2017. No goodwill resulted from Belden's sharepurchase.
Sheffield reported net income of $178,000 in 2017 and $250,000of net income during 2018. Dividends of $76,000 and $96,000 aredeclared and paid in 2017 and 2018, respectively. Belden uses theequity method.
On its 2018 comparative income statements, how much income wouldBelden report for 2017 and 2018 in connection with the company'sinvestment in Sheffield?
If Belden sells its entire investment in Sheffield on January 1,2019, for $414,000 cash, what is the impact on Belden's income?
Assume that Belden sells inventory to Sheffield during 2017 and2018 as follows. What amount of equity income should Beldenrecognize for the year 2018?
| Year | Cost to
Belden | Price to
Sheffield | Year-End Balance
(at Transfer Price) |
| 2017 | $26,460 | $42,000 | $18,000 (sold in following year) |
| 2018 | 34,770 | 61,000 | 38,000 (sold in following year) |
