The stockholders equity of Son Corporation on December 31, 2011, was as follows (in thousands): 15% preferred
Question:
The stockholders’ equity of Son Corporation on December 31, 2011, was as follows (in thousands):
15% preferred stock, $100 par, cumulative, nonparticipating, with
one year’s dividends in arrears ........... $1,000
Common stock, $10 par .................. 2,000
Other paid-in capital .................... 200
Retained earnings ..................... 300
Total stockholders’ equity ................ $3,500
Pam Corporation acquired 50 percent of Son’s preferred stock for $600,000 and 80 percent of its common stock for $2,000,000 on January 1, 2012. Son reported net income of $400,000 and paid dividends of $300,000 in 2012.
REQUIRED
1. Prepare the journal entries to record Pam’s 50% investment in Son preferred stock.
2. Calculate the excess fair value/book value differential from Pam’s 80% investment in Son common. Assume the differential is goodwill.
3. Compute Pam’s income from Son—preferred for 2012.
4. Compute Pam’s income from Son—common for 2012 (assume a 10-year amortization period for the fair value/book value differential).
5. Calculate the noncontrolling interest in Son that will appear in the consolidated balance sheet of Pam Corporation and Subsidiary on December 31, 2012.
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Step by Step Answer:
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith