Multiple-Choice Questions on Preferred Stock Ownership
Blank Corporation prepared the following summarized balance sheet on January 1, 20X1:
Assets | $150,000 | Liabilities | $ 20,000 |
|
| Preferred Stock | 30,000 |
|
| Common Stock | 40,000 |
|
| Retained Earnings | 60,000 |
Total Assets | $150,000 | Total Liabilities and Equities | $150,000 |
Shepard Company acquires 80 percent of Blank Corporation’s common stock on January 1, 20X1, for $80,000. At that date, the fair value of the common shares held by the noncontrolling interest is $20,000.
Required
Select the correct answer for each of the following questions.
1. The amount reported as noncontrolling interest in the consolidated balance sheet is
a. $20,000.
b. $26,000.
c. $30,000.
d. $50,000.
2. In addition to the common shares, Shepard Company purchases 70 percent of Blank’s preferred shares for $21,000. The amount reported as noncontrolling interest in Shepard’s consolidated balance sheet is
a. $9,000.
b. $20,000.
c. $29,000.
d. $50,000.
3. In addition to the common shares, Shepard Company purchases 70 percent of Blank’s preferred shares for $21,000 on January1, 20X1. IfShepard’s retained earnings are $150,000 on December 31, 20X0, the consolidated retained earnings reported immediately after the stock purchases are
a. $48,000.
b. $150,000.
c. $198,000.
d. $210,000.
4. In addition to the common shares, Shepard Company purchases 70 percent of Blank’s preferred shares for $21,000 on January 1, 20X1. Shepard has no preferred shares outstanding. The amount of preferred stock reported in the consolidated balance sheet immediately after the stock purchases is
a. $0.
b. $9,000.
c. $21,000.
d. $30,000.
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