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 was related to land held by Salt. At the date of acquisition, Salt had common stock outstanding of $520,000, additional paid-in capital of $200,000, and retained earnings of $540,000. During 20X7, Salt sold inventory to Pepper for $440,000. The inventory originally cost Salt $360,000. By year-end, 30 percent was still in Pepper's ending inventory. During 20X8, the remaining inventory was resold to an unrelated customer. Both Pepper and Salt use perpetual inventory systems. Income and dividend information for both Pepper and Salt for 20X7 and 20X8 are as follows: Pepper Company Salt Corp. Operating Income Dividends Net Income Dividends 20X7 $ 860,000 $ 160,000 $ 360,000 $ 200,000 20X8 910,000 200,000 420,000 200,000 Assume Pepper uses the fully adjusted equity method to account for its investment in Salt. Required: a. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X7. b. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X8.
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 was related to land held by Salt. At the date of acquisition, Salt had common stock outstanding of $520,000, additional paid-in capital of $200,000, and retained earnings of $540,000. During 20X7, Salt sold inventory to Pepper for $440,000. The inventory originally cost Salt $360,000. By year-end, 30 percent was still in Pepper's ending inventory. During 20X8, the remaining inventory was resold to an unrelated customer. Both Pepper and Salt use perpetual inventory systems. Income and dividend information for both Pepper and Salt for 20X7 and 20X8 are as follows: Pepper Company Salt Corp. Operating Income Dividends Net Income Dividends 20X7 $ 860,000 $ 160,000 $ 360,000 $ 200,000 20X8 910,000 200,000 420,000 200,000 Assume Pepper uses the fully adjusted equity method to account for its investment in Salt. Required: a. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X7. b. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X8.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Don't use Ai
Transcribed Image Text: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 was related to land held
by Salt. At the date of acquisition, Salt had common stock outstanding of $520,000, additional paid-in capital of $200,000, and retained earnings of $540,000. During 20X7, Salt sold inventory to Pepper for $440,000. The inventory originally cost Salt
$360,000. By year-end, 30 percent was still in Pepper's ending inventory. During 20X8, the remaining inventory was resold to an unrelated customer. Both Pepper and Salt use perpetual inventory systems.
Income and dividend information for both Pepper and Salt for 20X7 and 20X8 are as follows:
Pepper Company
Salt Corp.
Operating
Income
Dividends
Net Income Dividends
20X7
$
860,000
$
160,000
$ 360,000
$ 200,000
20X8
910,000
200,000
420,000
200,000
Assume Pepper uses the fully adjusted equity method to account for its investment in Salt.
Required:
a. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X7.
b. Present the worksheet consolidation entries necessary to prepare consolidated financial statements for 20X8.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
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