What Equity in Investee Income should MikeCo report

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Question - MikeCo Inc. holds 24 percent of the outstanding shares of JAY company and appropriately applies the equity method of accounting. Excess cost amortization (related to a patent) associated with this investment amounts to $10,000 per year. For 2016, JAY reported earnings of $115,000 and declares cash dividends of $30,000. During that year, JAY acquired inventory for $51,000, which it then sold to MikeCo for $85,000. At the end of 2016, MikeCo continued to hold merchandise with a transfer price of $29,000.

Required -

What Equity in Investee Income should MikeCo report for 2016?

How will the intra-entity transfer affect MikeCo reporting in 2017?

If MikeCo had sold the inventory to JAY, how would the answers to (a) and (b) have changed?

Reference no: EM132833659

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