E2-10 Calculate income and investment balance for midyear investment Pam Corporation acquired 25 percent of Sun Corporation’s outstanding common stock on October 1, for $300,000. A summary of Sun’s adjusted trial balances on this date and at December 31 follows (in thousands):

December 31 October 1 Debits Current assets $ 250 $ 125 Plant assets—net 750 775 Expenses (including cost of goods sold) 400 300 Dividends (paid in July) 100 100

$1,500 $1,300 Credits Current liabilities $ 150 $ 100 Capital stock (no change during the year) 500 500 Retained earnings January 1 250 250 Sales 600 450

$1,500 $1,300 Pam uses the equity method of accounting. No information is available concerning the fair values of Sun’s assets and liabilities.

REQuIRED 1. Determine Pam’s investment income from Sun Corporation for the year ended December 31.

2. Compute the correct balance of Pam’s investment in Sun account at December 31.