On January 1, 2012, Millay Inc. paid $700,000 for 10,000 shares of Genso Company’s voting common stock, which was a 10% interest in Genso. At that date, the net assets of Genso totaled $6,000,000. The fair values of all of Genso’s identifiable assets and liabilities were equal to their book values. Millay does not have the ability to exercise significant influence over the operating and financial policies of Genso. Millay received dividends of $1.50 per share from Genso on October 1, 2012. Genso reported net income of $550,000 for the year ended December 31, 2012.

   On July 1, 2013, Millay paid $2,325,000 for 30,000 additional shares of Genso Company’s voting common stock which represents a 30% investment in Genso. The fair values of all of Genso’s identifiable assets net of liabilities were equal to their book values of $6,550,000. As a result of this transaction, Millay has the ability to exercise significant influence over the operating and financial policies of Genso. Millay received dividends of $2.00 per share from Genso on April 1, 2013, and $2.50 per share on October 1, 2013. Genso reported net income of $650,000 for the year ended December 31, 2013, and $350,000 for the 6 months ended December 31, 2013.

Instructions
  (a) Prepare a schedule showing the income or loss before income taxes for the year ended December 31, 2012, that Millay should report from its investment in Genso in its income statement issued in March 2013.
  (b) During March 2014, Millay issues comparative financial statements for 2012 and 2013. Prepare schedules showing the income or loss before income taxes for the years ended December 31, 2012 and 2013, that Millay should report from its investment in Genso.