Question
EXERCISE 9-9 Various Preferred Stock CharacteristicsWorkpaper Entries LO 7 Sam's Company reported the following stockholders' equity account balances on December 31, 2014. Preferred stock (12%,
EXERCISE 9-9Various Preferred Stock CharacteristicsWorkpaper Entries LO 7
Sam's Company reported the following stockholders' equity account balances on December 31, 2014.
Preferred stock (12%, $100 par value, call price is $105)
$100,000
Common stock, $10 par value
500,000
Other contributed capitalpremium on issue of common stock
160,000
Retained earnings
110,000
Total
$870,000
On December 31, 2014, Peterson, Inc. acquired 60% of Sam Company's common stock for $550,000 and 40% of its preferred stock for $55,000.
The difference between the implied value of the common stock (preferred stock) and the book value is allocated entirely to land (other contributed capital and noncontrolling interest).
Required:
Prepare in general journal form the December 31, 2014, workpaper entries to eliminate the investment in common and preferred stock for each of the following independent cases:
1.Case 1: The preferred stock is noncumulative and nonparticipating.
2.Case 2: The preferred stock is cumulative and nonparticipating, and dividends were not paid in 2013 and 2014.
3.Case 3: The preferred stock is noncumulative and fully participating.
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