$6$ points

Playtown Corporation purchased $75$ percent of Sandbox Company common stock and $40$ percent of its preferred stock on January $1,206,$ for $$270,000$ and $$80,000,$ respectively. At the time of purchase, the fair value of Sandbox's common shares held by the noncontrolling interest was $$90,000.$ Sandbox's balance sheet contained the following balances:

For the year ended December $31,206,$ Sandbox reported net income of $$70,000$ and paid dividends of $$50,000($which includes the preferred dividend$).$ The preferred stock is cumulative and pays an annual dividend of $8$ percent.

Required:

a$.$ Prepare the journal entries recorded by Playtown for its investments in Sandbox during $20$X$6.$

b$.$ Prepare the consolidation entries needed to prepare the consolidated financial statements for Playtown Corporation as of December $31,206.$