(Solution) - Pep Corporation owns 40 percent of the outstanding voting stock -(2025 Original AI-Free Solution)

Paper Details

Pep Corporation owns 40 percent of the outstanding voting stock of Sat Corporation, acquired for $100,000 on July 1, 2011, when Sat?s common stockholders? equity was $200,000. The excess of investment fair value over book value acquired was due to valuable patents owned by Sat that were expected to give Sat a competitive advantage until July 1, 2016. Sat?s net income for 2011 was $40,000 (for the entire year), and for 2012, Sat?s net income was $60,000. Pep?s December 31, 2011 and 2012, inventories included unrealized profit on goods acquired from Sat in the amounts of $4,000 and $6,000, respectively. At December 31, 2011, Pep sold land to Sat at a gain of $2,000. This land is still owned by Sat at December 31, 2012.
REQUIRED
1. Compute Pep?s investment income from Sat for 2011 on the basis of a one-line consolidation.
2. Compute Pep?s investment income from Sat for 2012 on the basis of a one-line consolidation.