Question

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.



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  • CreatedMay 23, 2014
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