Page & Seed scenario:
Page Company purchased an 80% interest in the common stock of the Seed Company for $600,000 on January 1, 20X4, when Seed Company had the following stockholders' equity:
Any excess of cost over book value on the common stock purchase was attributed to goodwill. Page does not hold any of Seed's preferred stock. Seed had net income of $40,000 during 20X4 and paid no dividends.
-Refer to Page and Seed. The preferred stock is 2 years in arrears on January 1, 20X4. The controlling interest's share of Seed's 20X4 net income is ____.
A) $24,000
B) $23,360
C) $25,600
D) $32,000

Question

Page & Seed scenario:
Page Company purchased an 80% interest in the common stock of the Seed Company for $600,000 on January 1, 20X4, when Seed Company had the following stockholders' equity:
  Any excess of cost over book value on the common stock purchase was attributed to goodwill. Page does not hold any of Seed's preferred stock. Seed had net income of $40,000 during 20X4 and paid no dividends.
-Refer to Page and Seed. The preferred stock is 2 years in arrears on January 1, 20X4. The controlling interest's share of Seed's 20X4 net income is ____.
A) $24,000 
B) $23,360 
C) $25,600 
D) $32,000

Quizplus · Accepted Answer

The preferred stock is 2 years in arrears, so the controlling interest's share of Seed's 20X4 net income is $24,000.

Page & Seed Scenario