Chapter 9, Problem 9.1.4E

Multiple-Choice Questions on Preferred Stock Ownership

Blank Corporation prepared the following summarized balance sheet on January 1, 20X1:

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.

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

1. $0.
2. $9,000.
3. $21,000.
4. $30,000.