Reden Corporation purchased 45 percent of Montgomery Companys common stock on January 1, 20X9, at underlying book

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.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...