Chapter 2, Problem 11E Bookmark Show all steps. ON Investee with Preferred Stock Outstanding Reden Corporation purchased 45 percent of Montgomery Company's common stock on January 1, 20x9, at underlying book value of $288,000. Montgomery's balance sheet contained the following stockholders' equity balances: Preferred Stock ($5 par value, 50,000 shares issued and outstanding) $250,000 Common Stock ($1 par value, 150,000 shares issued and outstanding) 150,000 Additional Paid-In Capital 180,000 Retained Earnings 310,000 Total Stockholders' Equity $890,000 Montgomery's preferred stock is cumulative and pays a 10 percent annual dividend. Montgomery reported net income of $95,000 for 20X9 and paid total dividends of $40,000. Required Give the journal entries recorded by Reden Corporation for 20x9 related to its investment in Montgomery Company common stock