1. During 2012, Pin Corporation owns 20 percent of Sob Corporation's preferred stock and 80 percent of its common stock. Sob's stock outstanding on December 31, 2012, is as follows:

10% cumulative preferred stock .................. $ 200,000

Common stock ...................................... 1,400,000

Sob reported net income of $120,000 for the year ended December 31, 2012. What amount should Pin record as equity in earnings of Sob for the year ended December 31, 2012?

a. $84,000

b. $96,000

c. $96,800

d. $100,000

2. Pat Corporation uses the equity method to account for its 25% investment in Sam, Inc. During 2011, Pat received dividends of $30,000 from Sam and recorded $180,000 as its equity in the earnings of Sam. Additional information follows:

• The dividends received from Sam are eligible for the 80 percent dividends-received deduction.

• There are no other temporary differences.

• Enacted income tax rates are 30 percent for 2011 and thereafter.

In its December 31, 2011, balance sheet, what amount should Pat report for deferred income tax liability?

a. $9,000

b. $10,800

c. $45,000

d. $54,000

3. In 2011, Pal Corporation received $300,000 in dividends from Sal Corporation, its 80 percent owned subsidiary. What net amount of dividend income should Pal include in its 2011 consolidated tax return?

a. $300,000

b. $240,000

c. $210,000

d. $0

4. Pot Corporation and Sly Corporation filed consolidated tax returns. In January 2011, Pot sold land, with a basis of $60,000 and a fair value of $75,000, to Sly for $100,000. Sly sold the land in December 2012 for $125,000. In its 2012 and 2011 tax returns, what amount of gain should be reported for these transactions in the consolidated return?

2012 2011

a ......................... $25,000 ................. $40,000

b ........................ $50,000 ......................... 0

c ........................ $50,000 ................. $25,000

d ........................ $65,000 ......................... 0