Chapter 7, Problem 7.2E

Exercise 7 (LO 4) Equity adjustments with preferred stock. Brian Construction Company has the following stockholders' equity on January 1, 2015, the date on which Roller Company purchases an 80% interest in the common stock for $720,000:

Brian Construction Company did not pay preferred dividends in 2014.

Assume Ace Construction has me following net income (loss) for 2015 and 2016 and does not pay any dividends:

Roller maintains its investment account under the cost method. Prepare the cost-to-equity conversion entries necessary on Roller Company's books to adjust its investment account to the simple equity balance as of January 1, 2017.