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 $11,600 per year. For 2020, Marqueen reported earnings of $108,000 and declares cash dividends of $25,000. During that year, Marqueen acquired inventory for $56,000, which it then sold to BuyCo for $80,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $37,000. 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? (For all requirements, do not round intermediate calculations.)

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 $11,600 per year. For 2020, Marqueen reported earnings of $108,000 and declares cash dividends of $25,000. During that year, Marqueen acquired inventory for $56,000, which it then sold to BuyCo for $80,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $37,000. 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? (For all requirements, do not round intermediate calculations.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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BuyCo holds 25 percent of the outstanding shares of Marqueen 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 2012, Marqueen reported earnings of $100,000 and pays 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 2012, BuyCo continued to hold merchandise with a transfer price of $32,000. a. What Equity in Investee Income should BuyCo report for 2012? (Do not round intermediate calculations.) Equity in Investee Income b. How will the intra-entity transfer affect BuyCo's reporting in 2013? (Input the amount as a positive value.) Equity accrual for 2013 will increase by $ C. If BuyCo had sold the inventory to Marqueen, whether the answers to (a) and (b) would change? Yes O No
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