Pearl Corporation paid $150,000 on January 1, 2020 for a 25% interest in Sandlin Inc. On January 1,
2020, the book value of Sandlin's stockholders' equity consisted of $200,000 of common stock and
$200,000 of retained earnings. All the excess purchase cost over book value acquired was attributable to
a patent with an estimated life of 5 years. During 2020 and 2021, Sandlin paid $3,000 of dividends each
quarter and reported net income of $60,000 for 2020 and $80,000 for 2021. Pearl used the equity method.
Required:
1.
2.
Calculate Pearl's income from Sandlin for 2020.
Calculate Pearl's income from Sandlin for 2021.
3.
Determine the balance of Pearl's Investment in Sandlin account on December 31, 2021.
