On January 1, 2018, Lime acquired 80,000 common shares of Stone’s for $900,000. On that day, Stone's balance sheet showed the following shareholders' equity: $ 2 Cumulative preferred shares, 20,000 shares issued $120,000 Common stock, 100,000 shares issued $500,000 Retained Earnings $50,000 Total Equity $670,000 * Stone's preferred share dividends were two years in arrears on that date. Stone's Fair Values approximated its book values on that date with the following exceptions:
On January 1, 2018, Lime acquired 80,000 common shares of Stone’s for $900,000.
On that day, Stone's balance sheet showed the following shareholders' equity:
$ 2 Cumulative
Common stock, 100,000 shares issued $500,000
Total Equity $670,000
* Stone's preferred share dividends were two years in arrears on that date.
Stone's Fair Values approximated its book values on that date with the following exceptions:
Inventory had a fair value that was $30,000 higher than its book value. Plant and equipment had a fair value $10,000 lower than their book value.
The plant and equipment had an estimated remaining useful life of 10 years from the date of acquisition.
Required: Compute the amount of
- Allocation of equity between common stock and preferred stock: (5)
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Particulars |
Total |
Preference shares |
Common Stock |
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Pref. shares |
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Arrear Dividends |
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Common Stock |
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Total |
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Retained Earnings |
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Total and allocated |
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