Business, 03.09.2021 22:10 ashtonbillups
BuyCo, Inc., holds 26 percent of the outstanding shares of Marqueen Company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $10,100 per year. For 2020, Marqueen reported earnings of $120,000 and declares cash dividends of $32,000. During that year, Marqueen acquired inventory for $49,000, which it then sold to BuyCo for $70,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $31,000.
Required:
a. What Equity in Investee Income should BuyCo report for 2012?
b. How will the intra-entity transfer affect BuyCo’s reporting in 2013?
c. If BuyCo had sold the inventory to Marqueen, how would the answers to (a) and (b) have changed?
Answers: 3
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BuyCo, Inc., holds 26 percent of the outstanding shares of Marqueen Company and appropriately applie...
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