4.

BuyCo, Inc., holds 20 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 $11,900 per year. For 2020, Marqueen reported earnings of $117,000 and declares cash dividends of $34,000. During that year, Marqueen acquired inventory for $48,000, which it then sold to BuyCo for $80,000. At the end of 2020, BuyCo continued to hold merchandise with a transfer price of $33,000.

1. What Equity in Investee Income should BuyCo report for 2020?

2. How will the intra-entity transfer affect BuyCos reporting in 2021?

3. If BuyCo had sold the inventory to Marqueen, would the answers to (a) and (b) have changed?