Research Activity

Media General, Inc. is an independent, publicly owned communications company with interests in metropolitan newspapers, broadcast television, cable television, newsprint production, and diversified information services located primarily in the Southeast United States. Its 1998 annual report reported the following as a portion of its disclosure note related to investments:

Note 3: Investments in Unconsolidated Affiliates

--------------------------------------------------------------------------------

Summarized financial information for these investments accounted for by the equity method follows:

Southeast Paper Manufacturing Company:

(In thousands) 1998 1997

Current assets $ 79,434 $ 74,667

Noncurrent assets 294,628 318,478

Current liabilities 66,946 65,392

Noncurrent liabilities 74,765 118,894

(In thousands) 1998 1997 1996

Net sales $ 255,248 $ 246,468 $ 277,543

Gross profit 66,945 56,183 93,150

Net income 38,493 25,002 58,525

Company's equity in net income 12,831 8,334 19,508

To Do

Without access to other information reported by Media General in the annual report, please estimate Media Generals percentage ownership interest in Southeast Paper Manufacturing Company. Assuming Southeast Paper Manufacturing Company declared no cash dividends during 1998, what was the change in Media Generals investment account related to Southeast Paper Manufacturing Company?

Points to note

Because Media Generals equity in the investees net income ($12,831,000) is one-third the investees net income ($38,493,000), we can assume it has a one-third investment interest. This, in fact, is the case as stated in Media Generals annual report.

Media Generals investment account related to Southeast Paper Manufacturing Company would increase by $12,831,000.