The stockholders’ equity of Sol Corporation at December 31, 2010, was as follows (in thousands):
12% preferred stock, cumulative, nonparticipating,
$100 par, callable at $105 ........... $ 600
Common stock, $10 par .............. 1,000
Other paid-in capital ................ 140
Retained earnings ................. 760
Total stockholders’ equity .............. $2,500
Par Corporation purchased 80 percent of Sol’s common stock on January 2, 2011, for $1,536,000. During 2011, Sol reported a $100,000 net loss and paid no dividends. During 2012, Sol reported $500,000 net income and declared dividends of $344,000. Any excess fair value is allocated to goodwill.
REQUIRED
1. Compute the fair value/book value differential from Par’s investment in Sol.
2. Determine Par’s income (loss) from Sol for 2011.
3. Determine Par’s income (loss) from Sol for 2012.
4. Compute the balance of Par’s Investment in Sol account on December 31, 2012.