Chapter 2, Problem 2.11AE

Investee with Preferred Stock Outstanding
Reden Corporation purchased 45 percent of Montgomery Company’s common stock on January 1, 20X9, at underlying book value of $288,000. Montgomery’s balance sheet contained the following stockholders' equity balances:
  
Montgomery’s preferred stock is cumulative and pays a 10 percent annual dividend. Montgomery reported net income of $95,000 for 20X9 und paid total dividends of $40,000.
Required
Give the journal entries recorded by Reden Corporation for 20X9 related to its investment in Montgomery’s Company common stock.