E9–6Subsidiary with Preferred Stock Outstanding Playtown Corporation purchased 75 percent of Sandbox Company common stock and 40 percent of its preferred stock on January 1, 20X6, for $270,000 and $80,000, respectively. At the time of purchase, the fair value of Sandbox’s common shares held by the noncontrolling interest was $90,000. Sandbox’s balance sheet contained the following balances:Preferred Stock ($10 par value)    $200,000Common Stock ($5 par value)    150,000Retained Earnings     210,000Total Stockholders’ Equity    $560,000page 486  For the year ended December 31, 20X6, Sandbox reported net income of $70,000 and paid dividends of $50,000 (which includes the preferred dividend). The preferred stock is cumulative and pays an annual dividend of 8 percent.Required Prepare the journal entries recorded by Playtown for its investments in Sandbox during 20X6.Present the consolidation entries needed to prepare the consolidated financial statements for Playtown Corporation as of December 31, 20X6.

E9–6Subsidiary with Preferred Stock Outstanding

Playtown Corporation purchased 75 percent of Sandbox Company common stock and 40 percent of its preferred stock on January 1, 20X6, for $270,000 and $80,000, respectively. At the time of purchase, the fair value of Sandbox’s common shares held by the noncontrolling interest was $90,000. Sandbox’s balance sheet contained the following balances:
Preferred Stock ($10 par value)    $200,000
Common Stock ($5 par value)    150,000
Retained Earnings     210,000
Total Stockholders’ Equity    $560,000
page 486 

For the year ended December 31, 20X6, Sandbox reported net income of $70,000 and paid dividends of $50,000 (which includes the preferred dividend). The preferred stock is cumulative and pays an annual dividend of 8 percent.
Required

Prepare the journal entries recorded by Playtown for its investments in Sandbox during 20X6.
Present the consolidation entries needed to prepare the consolidated financial statements for Playtown Corporation as of December 31, 20X6.