On January 1, 20X9, Company A acquired 80 percent of the common stock and 60 per
ID: 2454702 • Letter: O
Question
On January 1, 20X9, Company A acquired 80 percent of the common stock and 60 percent of the preferred stock of Company B, for $400,000 and $60,000, respectively. At the time of acquisition, the fair value of the common shares of Company B held by the noncontrolling interest was $100,000. Company B's balance sheet contained the following balances: Preferred Stock ($5 par value) $100,000 Common Stock ($10 par value) 200,000 Retained Earnings 300,000 Total Stockholders’ Equity $600,000 For the year ended December 31, 20X9, Company B reported net income of $100,000 and paid dividends of $40,000. The preferred stock is cumulative and pays an annual dividend of 10 percent.
Based on the preceding information, the consolidating entry to prepare the consolidated financial statements for Company A as of December 31, 20X9 will include a credit to Investment in Company B—Common Stock for:
506,000
440,000
400,000
500,000
Explanation / Answer
On January 1, 20X9, Company A acquired 80 percent of the common stock and 60 per
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