Penguin Corporation Acquired a 60% Interest in Squid Corporation on January

Essay

Penguin Corporation acquired a 60% interest in Squid Corporation on January 1, 2012, 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 2012.Penguin regularly sells merchandise to Squid at 120% of Penguin's cost.The intercompany sales information for 2012 is as follows:
Required:
1.Determine the unrealized profit in Squid's inventory at December 31, 2012.
2.Compute Penquin's income from Squid for 2012.