Question:
Winner Corporation acquired 80 % of the common shares and 70 % of the preferred shares of First Corporation at underlying book value on January 1, 20X9. At that date, the fair value of the no controlling interest in First's common stock was equal to 20 % of the book value of its common stock. First's balance sheet at the time of acquisition contained the subsequent balances:
The preferred shares are cumulative and have a 10 % 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, First reported total income of $100,000 and paid no dividends.
1. Based on the preceding information, what is First's contribution to consolidated total income for 20X9?
A. $80,000
B. $100,000
C. $90,000
D. $50,000
2. Based on the previous information, what can be the amount of income to be assigned to the noncontrolling interest in the 20X9 consolidated income statement?
A. $21,000
B. $18,000
C. $23,000
D. $15,000
3. Based on the previous information, the amount assigned to noncontrolling stockholders' share of preferred stock interest in the preparation of a consolidated balance sheet on January 1, 20X9, is:
A. $40,000
B. $42,000
C. $36,000
D. $48,000
4. Based on the previous information, what is the portion of First's retained earnings assignable to its preferred shareholders on January 1, 20X9?
A. $40,000
B. $50,000
C. $60,000
D. $70,000
5. Based on the information provided, what is the book value of the common stock on January 1, 20X9?
A. $410,000
B. $360,000
C. $390,000
D. $350,000
6. Based on the information provided, what amount can be reported as the noncontrolling interest in the consolidated balance sheet on January 1, 20X9?
A. $70,000
B. $130,000
C. $118,000
D. $142,000