A subsidiary company may have preferred stock as part of its equity structure. Further, suppose that the preferred stock is cumulative and in arrears on dividends. What is the impact of the preferred stock on the excess of cost over book value on the original controlling investment in common stock? What is the impact of the preferred stock on the annual distribution of income? What is the theory followed in consolidated reporting when the parent purchases a portion of the subsidiary's preferred stock?

answer in about 150 words and provide references