On January 1, 2008, Figland Company purchased for cash 40% of Irene Company's 300,000 shares of voting common stock for \($1,800,000\). At the time, 40% of the book value of the underlying equity in Irene’s net assets was \($1,400,000;\) \($50,000\) of the excess was attributed to the excess of fair value over book value of inventory, which Irene accounts for using the first-in, first-out (FIFO) inventory method; and \($150,000\) is attributed to undervaluation of depreciable assets with an average remaining life of 10 years. The remainder is attributed to implicit goodwill.
Asa result of this transaction, Figland can exercise significant influence over Irene’s operating and financial policies. Irene’s net income for the year ended December 31, 2008 was \($600,000\). During 2008, Irene paid \($325,000\) in dividends to its stockholders.
Required:
1. How much income would Figland report on its 2008 income statement for its investment in Irene?
2. What would be the balance in the Investment in Irene Company account on December 31, 2008?