Lauralee, inc. owns a 30% interest in eastwood co., giving it representation on the investee’s board of directors. at the beginning of the year, the equity investment was carried on lauralee’s balance sheet at $500,000. during the year, eastwood reported net income of $250,000 and paid lauralee a dividend of $50,000. in addition, lauralee sold inventory to eastwood, recording a gross profit of $20,000 on the sale. at the end of the year, 50% of the merchandise remained unsold by eastwood.

required:
a. prepare the equity method journal entry to defer the unrealized inventory gross profit.
b. how much equity income should lauralee report from eastwood during the year?
c. what is the balance in the equity investment at the end of the year?

Your company is starting a new r& d initiative: a development of a new drug that dramatically reduces the addiction to smoking. the expert team estimates the probability of developing the drug succesfully at 60% and a chance of losing the investment of 40%. if the project is successful, your company would earn profits (after deducting the investment) of 9,000 (thousand usd). if the development is unsuccessful, the whole investment will be lost -1,000 (thousand usd). your company's risk preference is given by the expected utility function: u(x) v1000 +x, where x is the monetary outcome of a project. calculate the expected profit of the project . calculate the expected utility of the project . find the certainty equivalent of this r& d initiative . find the risk premium of this r& d initiative e is the company risk-averse, risk-loving or risk-neutral? why do you think so?