On January 1, 20X0, Pepper Corporation issued 10,000 of its $15 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturing’s balance sheet immediately before the acquisition contained the following items: SALT MANUFACTURING Balance Sheet January 1, 20X0 Book Value Fair Value Assets Cash and Receivables $ 48,000 $ 48,000 Land 77,000 87,000 Buildings and Equipment (net) 137,000 167,000 Patent 87,000 87,000 Total Assets 349,000 Liabilities & Equities Accounts Payable $ 153,000 153,000 Common Stock 143,000 Retained Earnings 53,000 Total Liabilities & Equities $ 349,000 On the date of the stock acquisition, Pepper's shares were selling at $40, and Salt Manufacturing’s buildings and equipment had a remaining economic life of 10 years. The amount of the differential assigned to goodwill is not impaired. In the two years following the stock acquisition, Salt Manufacturing reported net income of $88,000 and $58,000 and paid dividends of $30,000 and $48,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing. Prepare the journal entries recorded by Pepper during 20X0 related to its investment in Salt Manufacturing. Prepare the journal entries recorded by Pepper during 20X1 related to its investment in Salt Manufacturing. What balance will be reported in Pepper's investment account on December 31, 20X
On January 1, 20X0, Pepper Corporation issued 10,000 of its $15 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturing’s balance sheet immediately before the acquisition contained the following items: SALT MANUFACTURING Balance Sheet January 1, 20X0 Book Value Fair Value Assets Cash and Receivables $ 48,000 $ 48,000 Land 77,000 87,000 Buildings and Equipment (net) 137,000 167,000 Patent 87,000 87,000 Total Assets 349,000 Liabilities & Equities Accounts Payable $ 153,000 153,000 Common Stock 143,000 Retained Earnings 53,000 Total Liabilities & Equities $ 349,000 On the date of the stock acquisition, Pepper's shares were selling at $40, and Salt Manufacturing’s buildings and equipment had a remaining economic life of 10 years. The amount of the differential assigned to goodwill is not impaired. In the two years following the stock acquisition, Salt Manufacturing reported net income of $88,000 and $58,000 and paid dividends of $30,000 and $48,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing. Prepare the journal entries recorded by Pepper during 20X0 related to its investment in Salt Manufacturing. Prepare the journal entries recorded by Pepper during 20X1 related to its investment in Salt Manufacturing. What balance will be reported in Pepper's investment account on December 31, 20X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 20X0, Pepper Corporation issued 10,000 of its $15 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturing’s
| SALT MANUFACTURING | ||
| Balance Sheet | ||
| January 1, 20X0 | ||
| Book Value | Fair Value | |
|---|---|---|
| Assets | ||
| Cash and Receivables | $ 48,000 | $ 48,000 |
| Land | 77,000 | 87,000 |
| Buildings and Equipment (net) | 137,000 | 167,000 |
| Patent | 87,000 | 87,000 |
| Total Assets | 349,000 | |
| Liabilities & Equities | ||
| Accounts Payable | $ 153,000 | 153,000 |
| Common Stock | 143,000 | |
| 53,000 | ||
| Total Liabilities & Equities | $ 349,000 |
On the date of the stock acquisition, Pepper's shares were selling at $40, and Salt Manufacturing’s buildings and equipment had a remaining economic life of 10 years. The amount of the differential assigned to
In the two years following the stock acquisition, Salt Manufacturing reported net income of $88,000 and $58,000 and paid dividends of $30,000 and $48,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing.
Prepare the
Prepare the journal entries recorded by Pepper during 20X1 related to its investment in Salt Manufacturing.
What balance will be reported in Pepper's investment account on December 31, 20X1?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education