What is the Consolidated Retained Earnings on December 31, 2014? Pepper Company acquired 80% of the voting stock of Salt Company on January 1, 2001, whenSalt Company's retained earnings amounted to 130,000. The difference between the implied andbook value and fair values of the non-cash assets on the date of acquisition was allocated asfollows:P50, 00020, 00040, 000LandEquipment (10-year life)Goodwill• Salt Company reported retained earnings of P 260, 000 on January 1, 2014, and 320,000on December 31, 2014.• Salt Company reported net income of P90,000 and declared dividends of P30,000 in2014.• Pepper reported operating income in 2014 in the amount of P700,000 with dividends paidof P25,000 and retained earnings on December 31, 2014, of P3,500,000.The sales, cost of sales and intercompany sales made during 2014 are as follows:Реpper Co.P 2,500,0001,250,000Salt Co.Sales1,200,000875,000Cost of SalesIntercompany sales:Pepper to SaltSalt to Pepper320, 000290, 000There were no intercompany sales prior to 2013 and unrealized profits on January 1 and onDecember 31, 2014, resulting from intercompany sales are summarized below:Unrealized IntercompanyProfit onResulting from:Sales by Salt Company to Pepper CompanySales by Pepper Company to Salt CompanyJan. 01, 2014P 10,00015,000Dec. 31, 2014P 5,00020,000

Retained earnings: Retained earnings are the portion of earnings kept by the business for the…

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What is the Consolidated Retained Earnings on December 31, 2014?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter14: Intercorporate Investments In Common Stock

Section: Chapter Questions

Problem 16E

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Question

What is the Consolidated Retained Earnings on December 31, 2014?

Pepper Company acquired 80% of the voting stock of Salt Company on January 1, 2001, when
Salt Company's retained earnings amounted to 130,000. The difference between the implied and
book value and fair values of the non-cash assets on the date of acquisition was allocated as
follows:
P50, 000
20, 000
40, 000
Land
Equipment (10-year life)
Goodwill
• Salt Company reported retained earnings of P 260, 000 on January 1, 2014, and 320,000
on December 31, 2014.
• Salt Company reported net income of P90,000 and declared dividends of P30,000 in
2014.
• Pepper reported operating income in 2014 in the amount of P700,000 with dividends paid
of P25,000 and retained earnings on December 31, 2014, of P3,500,000.
The sales, cost of sales and intercompany sales made during 2014 are as follows:
Реpper Co.
P 2,500,000
1,250,000
Salt Co.
Sales
1,200,000
875,000
Cost of Sales
Intercompany sales:
Pepper to Salt
Salt to Pepper
320, 000
290, 000
There were no intercompany sales prior to 2013 and unrealized profits on January 1 and on
December 31, 2014, resulting from intercompany sales are summarized below:
Unrealized Intercompany
Profit on
Resulting from:
Sales by Salt Company to Pepper Company
Sales by Pepper Company to Salt Company
Jan. 01, 2014
P 10,000
15,000
Dec. 31, 2014
P 5,000
20,000

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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