Question

On January 1, 2011, Perez Company acquired 80% of Serrano Company's $300,000 par value common stock for $200,000 and 40% of Serrano Company's 8%, $100,000 par value preferred stock for $86,000. During 2011, Serrano Company reported net income of $80,000 and declared cash dividends of $45,000. Perez Company reported net income (including dividends from subsidiary) of $200,000 in 2011.

Required:
In each of the following independent cases, compute consolidated net income for 2011.
Case 1: The preferred stock is noncumulative and nonparticipating.
Case 2: The preferred stock is cumulative and nonparticipating. Dividends were in arrears two years as of January 1, 2011.
Case 3: The preferred stock is noncumulative and fully participating.
Case 4: The preferred stock is cumulative and fully participating. Dividends were in arrears one year as of January 1, 2011.



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  • CreatedMarch 13, 2015
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