Alcor and Vax Inc, both Canadian private companies, formed a joint venture on January 1, 2020 called Inventure Inc. Alcor and Vax each hold a 50% in the venture and share equally in any profits or losses arising from the venture. The following statements were prepared on December 31, 2020.Balance Sheets
Other Information: During 2020, Inventure purchased $10,000 from Alcor. Alcor recorded a gross profit of $2,000 on these sales. On December 31, 2020, Inventure’s inventories contained half of the merchandise purchased from Alcor. Alcor uses the cost method to account for its Investment in Inventure and uses the equity method to report its investment in the joint venture. An income tax allocation rate of 20% applies.
Compute the investment income (i.e. equity method income) from the joint venture for 2020.
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