Matthew owns 30 percent of the outstanding stock of Lindman and has the ability to significantly influence the investee’s operations and decision making. On January 1, 2015, the balance in the Investment in Lindman account is $406,000. Amortization associated with this acquisition is $13,800 per year. In 2015, Lindman earns an income of $298,000 and declares cash dividends of $74,500. Previously, in 2014, Lindman had sold inventory costing $38,400 to Matthew for $48,000. Matthew consumed all but 25 percent of this merchandise during 2014 and used the rest during 2015. Lindman sold additional inventory costing $45,600 to Matthew for $60,000 in 2015. Matthew did not consume 40 percent of these 2015 purchases from Lindman until 2016.
a. What amount of equity method income would Matthew recognize in 2015 from its ownership interest in Lindman?
b. What is the equity method balance in the Investment in Lindman account at the end of 2015?
101. Emma Jones contracted with the publisher of a GMAT test preparation manual package to sell the review materials at college fairs. She can purchase the book from the wholesaler at $64 per package, with the privilege of returning all unsold packages and receiving a $64 refund per package. She plans to sell the packages for $160 each. She also knows that she must pay $2240 to the organizers of the college fair for the booth rental. She will incur no other costs. What is the change in the contribution margin, in dollars, if Emma sells 48 packages instead of 8 packages?