Penguin Corporation acquired a 60% interest in Squid Corporation on January 1, 2014, at a cost equal to 60% of the book value of Squid's net assets. At the time of the acquisition, the book values of Squid's assets and liabilities were equal to the fair values. Squid reports net income of $880,000 for 2014. Penguin regularly sells merchandise to Squid at 120% of Penguin's cost. The intercompany sales information for 2014 is as follows:
 
Intercompany sales at selling price                                          $672,000
Sales value of merchandise unsold by Squid                            $132,000
 
Part 1:  Determine the unrealized profit in Squid's inventory at December 31, 2014.
 
Part 2:  Compute Penguin's income from Squid for 2014.