Sam’s Company reported the following stockholders’ equity account balances on December 31, 2011.
Preferred stock (12%, $100 par value, call price is $105)... $100,000
Common stock, $10 par value............... 500,000
Other contributed capital—premium on issue of common stock. 160,000
Retained earnings....... 110,000
Total............. $870,000
On December 31, 2011, Peterson, Inc. acquired 60% of Sam Company’s common stock for $550,000 and 40% of its preferred stock for $55,000. The difference between the implied value of the common stock (preferred stock) and the book value is allocated entirely to land (other contributed capital and noncontrolling interest).

Prepare in general journal form the December 31, 2011, workpaper entries to eliminate the investment in common and preferred stock for each of the following independent cases:
Case 1: The preferred stock is noncumulative and nonparticipating.
Case 2: The preferred stock is cumulative and nonparticipating, and dividends were not paid in 2010 and 2011.
Case 3: The preferred stock is noncumulative and fully participating.

  • CreatedMarch 13, 2015
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