Company S has the following stockholders equity on January 1, 2019: The preferred stock is cumulative and
Question:
Company S has the following stockholders’ equity on January 1, 2019:
The preferred stock is cumulative and has dividends one year in arrears on January 1, 2019.
Company P purchased an 80% interest in the common stock of Company S on January 1, 2019, for $1,400,000. Any excess of cost over book value was attributed to goodwill. Company S earned $80,000 during 2019 and paid no dividends. Company P had internally generated net income of $120,000.
What is consolidated net income for 2019, and how is it distributed to the controlling and noncontrolling interests?
How would the answer differ if Company P also purchases one-half of the preferred stock of Company S for $120,000?
Step by Step Answer:
Advanced Accounting
ISBN: 978-1305084858
12th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng