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E 6-8 Investment income from 40 percent investee (upstream and downstream sales) Pop Corporation owns 40 percent of the outstanding voting stock of Son
E 6-8 Investment income from 40 percent investee (upstream and downstream sales) Pop Corporation owns 40 percent of the outstanding voting stock of Son Corporation, acquired for $200,000 on July 1, 2016, when Son's common stockholders' equity was $400,000. The excess of investment fair value over book value acquired was due to valuable patents owned by Son that were expected to give Son a competitive advantage until July 1, 2021. Son's net income for 2016 was $80,000 (for the entire year), and for 2017, Son's net income was $120,000. Pop's December 31, 2016 and 2017, inventories included unrealized profit on goods acquired from Son in the amounts of $8,000 and $12,000, respectively. At December 31, 2016, Pop sold land to Son at a gain of $4,000. This land is still owned by Son at December 31, 2017. REQUIRED 1. Compute Pop's investment income from Son for 2016 on the basis of a one-line consolidation. 2. Compute Pop's investment income from Son for 2017 on the basis of a one-line consolidation.
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