Subsidiary preferred stock with dividends in arrears
The stockholders’ equity of Sir Corporation at December 31, 2011, was as follows (in thousands):
|
10% cumulative preferred stock, $100 par, callable at $105, |
$2,000 |
|
20,000 shares issued and outstanding, with one year’s |
|
|
dividends in arrears |
|
|
Common stock, $10 par, 200,000 shares issued and outstanding |
2,000 |
|
Additional paid in capital |
4,000 |
|
Retained earnings |
8,000 |
|
Total stockholders’ equity |
$16,000 |
On January 1, 2010, Pod Corporation purchased 90 percent of Sir Corporation’s common stock at $90 per share. Sir’s assets and liabilities were recorded at their fair values when Pod acquired its 90 percent interest. Any fair value/ book value differential is assigned to goodwill and is not amortized. During 2012, Sir reported net income of $2,400,000 and paid dividends of $1,200,000.
REQUIRED: Calculate the following:
1. The fair value/book value differential from Pod’s investment in Sir.
2. Pod’s income from Sir for 2012.
3. The balance of Pod’s investment in Sir at December 31, 2012.
4. Total noncontrolling interest in Sir on December 31, 2012.