On January 1, 2013, Nichols Company acquired 80% of Smith Company's common stock and 40% of its non-voting, cumulative preferred stock. The consideration transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred. Any excess acquisition-date fair value over book value is considered goodwill. The capital structure of Smith immediately prior to the acquisition is:

The consolidation entry at date of acquisition will include (referring to Smith):

A. Debit Common stock $500,000 and debit Preferred stock $120,000.

B. Debit Common stock $500,000, debit Preferred stock $120,000, and debit Additional paid-in capital $200,000.

C. Debit Common stock $400,000, debit Preferred stock $300,000, debit Additional paid-in capital $200,000, and debit Retained earnings $500,000.

D. Debit Common stock $400,000 and debit Additional paid-in capital $160,000.

E. Debit Common stock $500,000 and debit Preferred stock $300,000.

Common stock, $10 par value (50,000 shares outstanding) Preferred stock, 6% cumulative, S100 par value, 3,000 shares outstanding Additional paid in capital Retained earnings Total stockholders' equity $500,000 300,000 200,000 500.000 $1,500,000