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What Equity in Investee Income should BuyCo report

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Question - BuyCo, Inc., holds 25 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 $10,800 per year. For 2020, Marqueen reported earnings of $102,000 and declares cash dividends of $30,000. During that year, Marqueen acquired inventory for $54,000, which it then sold to BuyCo for $75,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $29,000.

-What Equity in Investee Income should BuyCo report for 2020?

-How will the intra-entity transfer affect BuyCo's reporting in 2021?

-If BuyCo had sold the inventory to Marqueen, would the answers to (a) and (b) have changed?

Reference no: EM133037338

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