Preferred stockholders normally have a preferential right over common shareholders when dividends are distributed and the distribution of assets in liquidation. The right to vote usually is suspended from preferred shareholders. During consolidation, before eliminating the intercompany common stock ownership, it is important to determine the amount of subsidiary stockholders’ equity related to preferred shareholders. Parent’s ownership of preferred stock must be eliminated. Any portion of subsidiary preferred stock not held by the parent is assigned to non-controlling interest. The things K’s controller need to know about preferred stock to determine the proper allocation of consolidated net income to the controlling and non-controlling interests.

Question

Want to see the full answer?

Answer 1

Question

Chapter 9, Problem 9.1C

To determine

Introduction: Preferred stockholders normally have a preferential right over common shareholders when dividends are distributed and the distribution of assets in liquidation. The right to vote usually is suspended from preferred shareholders. During consolidation, before eliminating the intercompany common stock ownership, it is important to determine the amount of subsidiary stockholders’ equity related to preferred shareholders. Parent’s ownership of preferred stock must be eliminated. Any portion of subsidiary preferred stock not held by the parent is assigned to non-controlling interest.

The things K’s controller need to know about preferred stock to determine the proper allocation of consolidated net income to the controlling and non-controlling interests.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1? Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of P360,000. Cost Alaska Co. preference shares P200,000 160,000 Valdez Co. ordinary shares Totals P360,000 The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income. On December 31, 20x1, the portfolio of Karen Co. comprised the following. Fair value - 12/31/x1 Alaska Co. preference shares P240,000 60,000 Valdez Co. ordinary shares Total P300,000 On December 31, 20x2, the portfolio of Karen Co. comprised the following: Fair value-12/31/x2 Alaska Co. preference shares P220,000 Valdez Co. ordinary shares 180,000 Total P400,000 On February 2, 20x3, all of the Alaska Co. preference shares were sold for P160,000 net of transaction costs. 60,000 100,000 O (60,000)

How much is the unrealized gain (loss) accumulated in equity as of December 31, 20x2? Karen Co. purchased the following equity securities on January 1, 20x1 for a total amount of P360,000. Cost Alaska Co. preference shares P200,000 160,000 Valdez Co. ordinary shares Totals P360,000 The shares did not qualify for recognition as held for trading, thus they were classified as investment in equity securities measured at fair value through other comprehensive income. On December 31, 20x1, the portfolio of Karen Co. comprised the following. Fair value - 12/31/x1 Alaska Co. preference shares P240,000 60,000 Valdez Co. ordinary shares Total P300,000 On December 31, 20x2, the portfolio of Karen Co. comprised the following: Fair value - 12/31/x2 Alaska Co. preference shares P220,000 180,000 Valdez Co. ordinary shares Total P400,000 On February 2, 20x3, all of the Alaska Co. preference shares were sold for P160,000 net of transaction costs. 0 100,000 40,000 O (40,000)

The par value per share of common stock represents the a. minimum selling price of the stock established by the articles of incorporation O b. amount of dividend per share to be received each year O C. minimum amount the stockholder will receive when the corporation is liquidated O d. dollar amount assigned to each share Previous paoe