Calculate Val Corporation Investment in Wat account

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Question - 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 -

1. Calculate Val Corporation's income from Wat for 2012.

2. Calculate Val Corporation's Investment in Wat account balance at December 31, 2012. Assume the book value of all assets and liabilities equals the fair value.

Reference no: EM132559511

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