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28. Penston Company owns 40% (40,000 shares) of Scranton Inc.,

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28. Penston Company owns 40% (40,000 shares) of Scranton Inc., which it purchased several years ago for $182,000. Since the date of acquisition, the equity method has been properly applied, and the book value of the investment account as of Jan 1, 2011 is $248,000. Excess patent cost amortization of $12,000 is still being recognized each year. During 2011, Scranton reports net income of $200,000, $320,000 in operating income earned evenly throughtout the year, and a $120,000 extraordinary loss incurred on Oct 1. No dividends were paid during the year. Penston sold 8,000 shares of Scranton on Aug 1, 2011 for $94,000 in cash. However, Penston retains the ability to significantly influence the investee. During the last quarter of 2010, Penston sold $50,000 in inventory (which it had originally purchased for only $30,000) to Scranton. At the end of that fiscal year, Scranton's inventory retained $9,000 (at sales price) of this merchandise, which was subsequently sold in the first quarter of 2011.
On Penstons financial statements for the year ended Dec 31, 2011, what income effects would be reported from its ownership in Scranton.
Submitted: 7 years ago.
Category: Homework
Expert:  Neo replied 7 years ago.

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