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 ofnoncontrolling 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 outstandingof $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 inventoryoriginally cost Salt $360,000. By year-end, 30 percent was still in Pepper' ending inventory. During 20X8, the remaining inventory was resold to an unrelatedcustomer. Both Pepper and Salt use perpetual inventory systems.Income and dividend information for both Pepper and Salt for 20X7 and 20X8 are as follows:20X720X8Pepper CompanyOperatingIncome$860,000910,000Dividends$160,000200,000Salt Corp.Net Income$360,000420,000Dividends$200,000200,000Assume Pepper uses the cost 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.

AccountDebit (USD)Credit (USD)Investment in Salt Corp.1,242,000Common Stock - Salt520,000Additional…

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.

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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