Use the following information to answer the question(s)below.
On January 1,2011,Pamplin Corporation stockholders' equity consisted of $1,000,000 of $10 par value Common Stock,$750,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.On January 1,2011,Pamplin purchased 90% of the outstanding common stock of Sage Corporation for $1,500,000 with all excess purchase cost assigned to goodwill.The stockholders' equity of Sage on this date consisted of $800,000 of $100 par value,8% cumulative,preferred stock callable at $105,$900,000 of $10 par value common stock and $500,000 of Retained Earnings.Sage's net income for 2011 was $100,000.
On January 1,2011,no preferred dividends are in arrears.No dividends are declared or paid in 2011.In a separate transaction on January 1,2011,Pamplin purchased 70% of Sage's preferred stock for $600,000.
-For the year ending December 31,2011,the amount of Pamplin's income from Sage (associated with the common stock investment in Sage)is

Question

Quizplus · Accepted Answer

A)
Preliminary computations:
Total stockholders' equity (Sage)$2,200,000
Less: Preferred stockholders' equity
($800,000 × 1.05)840,000
Equals: Common stockholders' equity $1,360,000
Net income as given $100,000
Less: Preferred dividends ($800,000 × 8%)64,000
Income available to the common stockholders $36,000
Ownership percentage 90%
Income from Sage $32,400

Use the Following Information to Answer the Question(s)below