Mm.4.Subject :- Account On January 1, 20X7, Pepper Company acquired 90 percent of the outstanding common stock of Salt Corporation for$1,242,000. On that date, the fair value of noncontrolling interest was equal to $138,000. The entire differential wasrelated to land held by Salt. At the date of acquisition, Salt had common stock outstanding of $520,000, additional paid-incapital of $200,000, and retained earnings of $540,000. During 20X7, Salt sold inventory to Pepper for $440,000. Theinventory originally cost Salt $360,000. By year-end, 30 percent was still in Pepper's ending inventory. During 20X8, theremaining inventory was resold to an unrelated customer. Both Pepper and Salt use perpetual in ventory systems. Incomeand dividend information for both Pepper and Salt for 20X7 and 20X8 are as follows:Pepper Company Salt Corp.Operating Income Dividends Net Income Dividends20X7 $ 860,000 $ 160,000 $360,000 $200,00020X8 $910,000 $200000 $420,000 $200,000.Assume Pepper uses the fully adjusted equity method to account for its investment in Salt. Required: Present theconsolidation entries necessary to prepare consolidated financial statements for 20X8.

To prepare consolidated financial statements for 20X8, we need to consolidate the financial…

Answered: $1,242,000. On that date, the fair…

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