Pan Corporation Has Total Stockholders' Equity of $5,000,000 Consisting of $1,000,000

question 35

Multiple Choice

Pan Corporation has total stockholders' equity of $5,000,000 consisting of $1,000,000 of $10 par value Common Stock,$1,000,000 of Additional Paid-in Capital,and $3,000,000 of Retained Earnings.Pan owns 80% of Sailor Corporation's common stock purchased at book value,which equals fair value.Sailor has $900,000 of 10% cumulative preferred stock outstanding,with no preferred dividends in arrears.The preferred stock has no call price,redemption price or liquidation price.Pan acquired 60% of the preferred stock of Sailor for $500,000.After this transaction the balances in Pan's Retained Earnings and Additional Paid-in Capital accounts,respectively,are

• A)$2,960,000 and $1,000,000.
• B)$3,000,000 and $960,000.
• C)$3,000,000 and $1,040,000.
• D)$3,040,000 and $1,000,000.

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