BuyCo, Incorporated, holds 21 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 $108,000 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 2023, BuyCo continued to hold merchandise with a transfer price of $27,000. a. What Equity in Investee Income should BuyCo report for 2023? b. How will the intra-entity transfer affect BuyCo's reporting in 2024? c. If BuyCo had sold the inventory to Marqueen, would your answers to parts (a) and (b) change? a. Equity in investee income $ 15,050 b. Equity accrual for 2024 will be increased by $ 25,050 c. If BuyCo had sold the inventory to Marqueen, would your answers to parts (a) and (b) change? No

BuyCo, Incorporated, holds 21 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 $108,000 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 2023, BuyCo continued to hold merchandise with a transfer price of $27,000. a. What Equity in Investee Income should BuyCo report for 2023? b. How will the intra-entity transfer affect BuyCo's reporting in 2024? c. If BuyCo had sold the inventory to Marqueen, would your answers to parts (a) and (b) change? a. Equity in investee income $ 15,050 b. Equity accrual for 2024 will be increased by $ 25,050 c. If BuyCo had sold the inventory to Marqueen, would your answers to parts (a) and (b) change? No

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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