Company S has the following stockholders’ equity on January 1, 2015:
Common stock ($1par, 100,000 shares) ............... $100,000
6%preferred stock ($100par, 2,000 shares ............. 200,000
Paid-in capital in excess of par ................... 900,000
Retained earnings ....................... 500,000
The preferred stock is cumulative and has dividends one year in arrears on
January 1, 2015.
Company P purchased an 80% interest in the common stock of Company S on January 1, 2015, for $1,400,000. Any excess of cost over book value was attributed to goodwill. Company S earned $80,000 during 2015 and paid no dividends. Company P had internally generated net income of $120,000.
What is consolidated net income for 2015, and how is it distributed to the controlling and non-controlling interests?
How would the answer differ if Company P also purchases one-half of the preferred stock of Company S for $120,000?