Clayton Corporation purchased 75 percent of the common stock and 40 percent of the preferred stock of Topple Company on January 1, 20X6, for \(\$ 270,000\) and \(\$ 80,000\), respectively. At the time of purchase, the balance sheet of Topple contained the following balances:

For the year ended December 31, 20X6, Topple Company reported net income of \(\$ 70,000\) and paid dividends of \(\$ 50,000\). The preferred stock is cumulative and pays an annual dividend of 8 percent.
\section*{Required}

a. Prepare the journal entries recorded by Clayton Corporation for its investments in Topple Company during 20X6.
\(b\). Present the eliminating entries needed to prepare the consolidated financial statements for Clayton Corporation as of December 31, 20X6.

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Preferred Stock ($10 par value) $200,000 Common Stock ($5 par value) Retained Earnings Total Stockholders' Equity 150.000 210,000 $560,000