1) BuyCo, Inc. holds 28 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 $12,000 per year. For 2017, Marqueen reported earnings of $119,000 and declares cash dividends of $34,000. During that year, Marqueen acquired inventory for $60,000, which it then sold to BuyCo for $75,000. At the end of 2017, BuyCo continued to hold merchandise with a transfer price of $27,000.
- What Equity in Investee Income should BuyCo report for 2017?
- How will the intra-entity transfer affect BuyCo’s reporting in 2018?
- If BuyCo had sold the inventory to Marqueen, how would the answers to (a) and (b) have changed?
(Do not round intermediate calculations.)