Clayton Corporation purchased 75 percent of Topple Company common stock and 40 percent of its preferred stock on January 1, 20X6, for $270,000 and $80,000, respectively. At the time of purchase, the fair value of Topple's common shares held by the noncontrolling interest was $90,000.
Topple's balance sheet contained the following balances:
Preferred Stock ($10 par value) .... $200,000
Common Stock ($5 par value)..... 150,000
Retained Earnings........... 210,000
Total Stockholders’ Equity...... $560,000

For the year ended December 31, 20X6, Topple 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.

a. Prepare the journal entries recorded by Clayton for its investments in Topple during 20X6.
b. Present the elimination entries needed to prepare the consolidated financial statements for Clayton Corporation as of December 31, 20X6.

  • CreatedMay 23, 2014
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