BuyCo holds 25 percent of the outstanding shares of Marqueen and


Question Description:

15

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 (Click to select)increasedecreaseby $ .

c.
If BuyCo had sold the inventory to Marqueen, whether the answers to (a) and (b) would change?

Yes
No

Answer

15