Reden Corporation purchased 40 percent of Montgomery Company’s common stock on January 1, 20X9, at underlying book value of $262,400. Montgomery’s balance sheet contained the following stockholders’ equity balances:Preferred Stock ($4 par value, 42,000 shares issued and outstanding)$ 168,000Common Stock ($1 par value, 145,000 shares issued and outstanding)145,000Additional Paid-In Capital189,000Retained Earnings322,000Total Stockholders’ Equity$ 824,000Montgomery’s preferred stock is cumulative and pays a 5 percent annual dividend. Montgomery reported net income of $95,000 for 20X9 and paid total dividends of $46,000.Required:Give the journal entries recorded by Reden Corporation for 20X9 related to its investment in Montgomery Company common stock.Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

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Answered: Reden Corporation purchased 40 percent…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Reden Corporation purchased 40 percent of Montgomery Company’s common stock on January 1, 20X9, at underlying book value of $262,400. Montgomery’s balance sheet contained the following stockholders’ equity balances:

Preferred Stock ($4 par value, 42,000 shares issued and outstanding)	$ 168,000
Common Stock ($1 par value, 145,000 shares issued and outstanding)	145,000
Additional Paid-In Capital	189,000
Retained Earnings	322,000
Total Stockholders’ Equity	$ 824,000

Montgomery’s preferred stock is cumulative and pays a 5 percent annual dividend. Montgomery reported net income of $95,000 for 20X9 and paid total dividends of $46,000.

Required:

Give the journal entries recorded by Reden Corporation for 20X9 related to its investment in Montgomery Company common stock.

Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

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