Calculate income and investment account balance (investee has preferred stock)
Val Corporation paid $290,000 for 40 percent of the outstanding common stock of Wat Corporation on January 2, 2012. During 2012, Wat paid dividends of $48,000 and reported net income of $108,000. A summary of Wat’s stockholders’ equity at December 31, 2011 and 2012 follows (in thousands):
|
December 31, |
2011 |
2012 |
|
8% cumulative preferred stock, $100 par |
$100 |
$100 |
|
Common stock, $10 par |
300 |
300 |
|
Premium on preferred stock |
10 |
10 |
|
Other paid in capital |
90 |
90 |
|
Retained earnings |
100 |
160 |
|
Total stockholders’ equity |
$600 |
$660 |
REQUIRED: Calculate Val Corporation’s income from Wat for 2012 and its Investment in Wat account balance at December 31, 2012. Assume the book value of all assets and liabilities equals the fair value.