Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
-Based on the preceding information,what is the portion of Shovel's retained earnings assignable to its preferred shareholders on January 1,20X9?

Question

Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
  The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
-Based on the preceding information,what is the portion of Shovel's retained earnings assignable to its preferred shareholders on January 1,20X9?

Quizplus · Accepted Answer

The Answer of Pail Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of Shovel Corporation at underlying book value on January 1,20X9.At that date,the fair value of the noncontrolling interest in Shovel's common stock was equal to 20 percent of the book value of its common stock.Shovel's balance sheet at the time of acquisition contained the following balances:
  The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1,20X9.All of the $5 par value preferred shares are callable at $6 per share.During 20X9,Shovel reported net income of $100,000 and paid no dividends.
-Based on the preceding information,what is the portion of Shovel's retained earnings assignable to its preferred shareholders on January 1,20X9?

Pail Corporation Acquired 80 Percent of the Common Shares and 70