Jack Ltd. paid $3,500,000 cash on January 1 to acquire 30 percent of William Ltd.s outstanding common stocks. Assume that William Ltd.s assets and liabilities were at fair value equal to book value on this date. At the end of the period, William Ltd. reported net income of $1,000,000. The information of William Ltd.s shareholders equity on January 1 (in thousands) follows:

1 percent cumulative preferred stock, $10 par $1,000

Common stock, $10 par 3,000

Additional paid-in capital 5,000

Retained earnings 3,000

REQUIRED

1. Calculate goodwill from Jack Ltd.s investment in William Ltd.

2. Calculate Jack Ltd.s income from William Ltd.

E2-9 Investee with preferred stock Jack Ltd. paid $3,500,000 cash on January 1 to acquire 30 percent of William Ltd.'s outstanding common stocks. Assume that William Ltd.'s assets and liabilities were at fair value equal to book value on this date. At the end of the period, William Ltd. reported net income of $1,000,000. The information of William Ltd.'s shareholders' equity on January 1 (in thousands) follows: 5 CHAPTER 2 1 percent cumulative preferred stock, $10 par Common stock, $10 par Additional paid-in capital Retained earnings $1,000 3,000 5,000 3,000 REQUIRED 1. Calculate goodwill from Jack Ltd.'s investment in William Ltd. 2. Calculate Jack Ltd.'s income from William Ltd