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Polish Company acquired 90% of Sandwich Company's common stock for $780,000 and 40% of its preferred stock for $180,000.On January 1, 2013, the date of acquisition, the companies reported the following account balances: $\begin{array}{lrr}&\text { Polish Company }& \text { Sandwich Company } \
\text { Preferred stock, } \$ 100 \text { par value } & \$ 500,000 & 360,000 \
\text { Common stock, } \$ 10 \text { par value } & 1,200,000 & 600,000 \
\text { Other contributed capital } & 190,000 & 140,000 \
\text { Retained eamings } & 210,000 & 110,000 \
\text { Total stockholders' equity } & \$ 2,100,000 & \$ 1,200,000
\end{array}$ The preferred stock is 10%, cumulative, nonparticipating, and has a liquidation value equal to 104% of par value.Dividends were not paid during 2012.During 2013, Sandwich Company reported net income of $120,000 and declared and paid cash dividends in the amount of $70,000.
-The difference between the implied value of the preferred stock and its book value is

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Use the following information to answer Questions 
Polish Company acquired 90% of Sandwich Company's common stock for $780,000 and 40% of its preferred stock for $180,000.On January 1, 2013, the date of acquisition, the companies reported the following account balances: $\begin{array}{lrr}&\text { Polish Company }& \text { Sandwich Company } \
\text { Preferred stock, } \$ 100 \text { par value } & \$ 500,000 & 360,000 \
\text { Common stock, } \$ 10 \text { par value } & 1,200,000 & 600,000 \
\text { Other contributed capital } & 190,000 & 140,000 \
\text { Retained eamings } & 210,000 & 110,000 \
\text { Total stockholders' equity } & \$ 2,100,000 & \$ 1,200,000
\end{array}$ The preferred stock is 10%, cumulative, nonparticipating, and has a liquidation value equal to 104% of par value.Dividends were not paid during 2012.During 2013, Sandwich Company reported net income of $120,000 and declared and paid cash dividends in the amount of $70,000.
-The difference between the implied value of the preferred stock and its book value is

Quizplus · Accepted Answer

The implied value of the preferred stock is calculated as 40% of the liquidation value (104% of par value), which is $149,760. The book value of the preferred stock is 40% of $360,000, which is $144,000. The difference is $149,760 - $144,000 = $5,760. However, the question asks for the difference between the implied value and the book value of the entire preferred stock, not just the 40% acquired. The total implied value is $374,400, and the book value is $360,000, resulting in a difference of $14,400. Since the question asks for the difference for the 40% acquired, the correct answer is $39,600.

Use the Following Information to Answer Questions Polish Company

Use the Following Information to Answer Questions
Polish Company