Bristol Corporation acquired 40 percent of the voting stock of Manchester Corporation on January 2, 2016, for \($3.2\) million in cash. Manchester's balance sheet and estimated fair values of its assets and liabilities on January 2, 2016, are as follows:

In addition to its reported assets, Manchester has unreported franchise agreements (5-year life) valued at \($1\) million. Its property and equipment has a 20-year average remaining life. Manchester reported income of \($1.8\) million for 2016.

Required

a. How many shares of Manchester stock did Bristol acquire?

b. Compute Bristol’s equity in Manchester’s net income for 2016.

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(in thousands) Assets MANCHESTER CORPORATION Balance Sheet January 2, 2016 Book Value Fair Value Cash and receivables.... $ 400 $ 400 Inventory (FIFO) 1,200 800 Investments 300 300 Land.... 800 2,000 Property and equipment... 4,200 1,500 Less: Accumulated depreciation (1,300) Total assets $5,600 Liabilities and Equity Current liabilities.. $ 900 $ 900 Long-term liabilities 3,000 3,000 Common stock, $2.00 par. 500 Additional paid-in capital. 1,000 Retained earnings 800 Accumulated other comprehensive income. (600) Total liabilities and equity.... $5,600