1. The difference between the implied value of the preferred stock and its book value is

a. $60,000.

b. $78,000

c. $55,200.

d. $36,000.

e. none of these.

2. Noncontrolling interest in the 2013 reported net income of Smoker Company is

a. $50,000.

b. $20,000.

c. $80,000.

d. $56,000.

e. none of these.

Pentagon Company acquired 90% of Smoker Company's common stock for $1,300,000 and 40% of its preferred stock for $300,000. On January 1, 2013, the date of acquisition, the companies reported the following account balances: Pentagon Company Smoker Company Preferred stock, $100 par value $ 800,000 $ 600,000 Common stock, $10 par value 2,000,000 1,000,000 Other contributed capital 320,000 230,000 Retained earnings 350,000 180,000 Total stockholders' equity $3,470,000 $2,010,000 The preferred stock is 10%, cumulative, nonparticipating, and has a liquidation value equal to 102% of par value. Dividends were not paid during 2012. During 2013, Smoker Company reported net income of $200,000 and declared and paid cash dividends in the amount of $120,000