Use the following information to answer questions 2 through 8. Pfeifer Corporation acquired an 80% interest in Stem Corporation several years ago when the book values and fair values of Stern's assets and liabilities were equal. At the time of acquisition, the cost of the 80% interest was equal to 80% of the book value of Stern's net assets. Separate company income statements for Pfeifer and Stern for the year ended December 31, 20X4 are summarized as follows: Sales Revenue Investment income from Stern Cost of Goods Sold Expenses Net Income Pfeifer $1,000,000 85,000 Stem $600,000 (600,000) (300,000) (200,000) $285,000 (200,000) $100,000 During 20X3, Pfeifer sold merchandise that cost $120,000 to Stern for $180,000. Half of this merchandise remained in Stern's inventory at December 31, 20X3. During 20X4, Pfeifer sold merchandise that cost $150,000 to Stern for $225,000. One-third of this merchandise remained in Stern's December 31, 20X4 inventory.