Various Preferred Stock Characteristics—Compute Consolidated Income
On January 1, 2011, Perez Company acquired 80% of Serrano Company”s $300,000 par value common stock for $200,000 and 40% of Serrano Company”s 8%, $100,000 par value preferred stock for $86,000. During 2011, Serrano Company reported net income of $80,000 and declared cash dividends of $45,000. Perez Company reported net income (including dividends from subsidiary) of $200,000 in 2011.
Required:
In each of the following independent cases, compute consolidated net income for 2011.
Case 1: The preferred stock is noncumulative and nonparticipating.
Case 2: The preferred stock is cumulative and nonparticipating. Dividends were in arrears two years as of January 1, 2011.
Case 3: The preferred stock is noncumulative and fully participating.
Case 4: The preferred stock is cumulative and fully participating. Dividends were in arrears one year as of January 1, 2011.