Which of the following results in an increase in the investment account when applying the equity method? Sale of a portion of the investment during the current year. Unrealized gain on intra-entity inventory transfers for the current year. Dividends paid by the investor. Dividends paid by the investee. Unrealized gain on intra-entity inventory transfers for the prior year.

In a situation where the investor exercises significant influence over the investee, which of the following entries is not actually posted to the books of the investor?
1) Debit to the Investment account, and a Credit to the Equity in Investee Income account.
2) Debit to Cash (for dividends received from the investee), and a Credit to Dividend Revenue.
3) Debit to Cash (for dividends received from the investee), and a Credit to the Investment account. Entries 2 and 3. Entry 1 only. Entry 3 only. Entry 2 only. Entries 1 and 2.

Which statement is true concerning unrealized profits in intra-entity inventory transfers when an investor uses the equity method? Different adjustments are made for upstream and downstream transfers. Adjustments will be made only when profits are known upon sale to outsiders. The same adjustments are made for upstream and downstream transfers. The investor and investee make reciprocal entries to defer and realize inventory profits. No adjustments are necessary.

Acker Inc. bought 40% of Howell Co. on January 1, 2012 for $576,000. The equity method of accounting was used. The book value and fair value of the net assets of Howell on that date were $1,440,000. Acker began supplying inventory to Howell as follows:

Howell reported net income of $100,000 in 2012 and $120,000 in 2013 while paying $40,000 in dividends each year.

What is the amount of unrealized intra-entity inventory profit to