[Preferred stock] Pin Corporation owns 20% of Sob Corporation’s preferred sto

1. [Preferred stock] Pin Corporation owns 20% of Sob Corporation’s preferred stock and 80% of its common stock. Sob’s stock outstanding on December 31, 2011, is as follows:
10% cumulative preferred stock …… $ 200,000
Common stock …………………….. 1,400,000
Sob reported net income of $120,000 for the year ended December 31, 2011. What amount should Pin record as equity in earnings of Sob for the year ended December 31, 2011?
(a) $84,000
(b) $96,000
(c) $96,800
(d) $100,000
2. [Tax] Pat Corporation uses the equity method to account for its 25% investment in Sam, Inc. During 2011, Pat received dividends of $30,000 from Sam and recorded $180,000 as its equity in the earnings of Sam. Additional information follows:
■ The dividends received from Sam are eligible for the 80% dividends-received deduction.
■ There are no other temporary dif...



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