Thomas Inc Kuried Co Acquired All of the Voting Common Stock of Thomas

question 67

Essay

Thomas Inc. had the following stockholders' equity accounts as of January 1, 2013: $\begin{array}{lr}\text { Preferred stock - } \$ 90 \text { par value, nonvoting and nonparticipating; }\\\text {\( 9 \% \) cumulative dividend }&\$2,700,000\\\text {Common stock - \$25 par value }&5,600,000\\\text {Retained earnings }&14,000,000\\\end{array}$
Kuried Co. acquired all of the voting common stock of Thomas on January 1, 2013, for $20,656,000. The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000. A database valued at $656,000 was recognized and amortized over five years.
During 2013, Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends. Kuried used the equity method to account for this investment.
What is the controlling interest share of Thomas' net income for the year ended December 31, 2013?

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Definitions:

Unit Variable Costs

Costs that vary directly with the production volume, such as materials and labor, on a per-unit basis.

Contribution Margin Ratio

A financial metric that shows how much of a company's revenue is available after variable costs to cover fixed costs and generate profit.

Unit Contribution Margin

The difference between the selling price per unit and the variable cost per unit, showing how much each unit contributes to covering fixed costs and generating profit.

Fixed Costs

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.