Subsidiary Preferred Stock Outstanding
Emerald Corporation acquired 10,500 shares of the common stock and 800 shares of the 8 percent preferred stock of Pert Company on December 31, 20X4, at underlying book value. At that date, the fair value of the noncontrolling interest in Pert’s common stock was equal to 30 percent of the book value of its common stock. Pert reported the following balance sheet amounts on January 1, 20X5:
Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation | $ 30,000 70,000 120,000 600,000 (150,000) | Accounts Payable Bonds Payable Preferred Stock Common Stock Retained Earnings | $ 20,000 100,000 200,000 150,000 200,000 |
Total Assets | $670,000 | Total Liabilities and Equities | $670,000 |
Pert’s preferred stock is $100 par value, and its common stock is $10 par value. The preferred dividends are cumulative and are two years in arrears on January 1, 20X5. Pert reports net income of $34,000 for 20X5 and pays no dividends.
Required
a. Present the worksheet eliminating entries needed to prepare a consolidated balance sheet on January 1, 20X5.
b. Assuming that Emerald reported income from its separate operations of $80,000 in 20X5, compute the amount of consolidated net income and the amount of income to be assigned to the controlling shareholders in the 20X5 consolidated income statement.
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