E 9-13 Computations (treasury stock and conventional)

Pug Corporation acquired a 70 percent interest in Sat Corporation for $238,000 on January 2, 2015, when Sat’s equity consisted of $200,000 capital stock and $50,000 retained earnings. The excess is due to a patent amortized over a 10-year period, at $9,000 per year. Pug accounted for its investment in Sat during 2015 as follows:

Investment cost January 2, 2015 $238,000 Income from Sat [($40,000 - $9,000) * 70%] 21,700 Dividends from Sat ($20,000 * 70%) (14,000)

Investment balance December 31, 2015 $245,700 On January 3, 2016, Sat acquired a 10 percent interest in Pug at a $60,000 fair value equal to book value. No intercompany profit transactions have occurred. Incomes and dividends for 2016 were as follows:

Pug Sat Separate income $120,000 $50,000 Dividends 60,000 30,000 REQuIRED