Calculate income and investment balance when investee capital structure includes preferred stock
Run Company had net income of $400,000 and paid dividends of $200,000 during 2012. Run’s stockholders’ equity on December 31, 2011, and December 31, 2012, is summarized as follows (in thousands):
|
December 31, 2011 |
December 31, 2012 |
|
|
10% cumulative preferred stock, $100 par |
$ 300 |
$ 300 |
|
Common stock, $1 par |
1,000 |
1,000 |
|
Additional paid in capital |
2,200 |
2,200 |
|
Retained earnings |
500 |
700 |
|
Stockholders’ equity |
$4,000 |
$4,200 |
On January 2, 2012, Nic Corporation purchased 300,000 common shares of Run at $4 per share and also paid $50,000 direct costs of acquiring the investment.
REQUIRED: Determine (1) Nic’s income from Run for 2012 and (2) the balance of the investment in the Run account at December 31, 2012.