BuyCo, Inc., holds 25 percent of the outstanding shares of Marqueen Company and appropriately applies the equity
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 $10,000 per year. For 2023, Marqueen reported earnings of $100,000 and declares cash dividends of $30,000. During that year, Marqueen acquired inventory for $50,000, which it then sold to BuyCo for $80,000. At the end of 2023, BuyCo continued to hold merchandise with a transfer price of $32,000.
a. What Equity in Investee Income should BuyCo report for 2023?
b. How will the intraentity transfer affect BuyCo’s reporting in 2024?
c. If BuyCo had sold the inventory to Marqueen, how would the answers to parts (a) and (b) have changed?
Step by Step Answer:
Advanced Accounting
ISBN: 9781264798483
15th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer And Timothy Doupnik