Pepper Home Builders Inc. acquired 80 percent of Salty Concrete Works stock on January 1, 20X3, for
Question:
Pepper Home Builders Inc. acquired 80 percent of Salty Concrete Works stock on January 1, 20X3, for $360,000. At that date, the fair value of the noncontrolling interest was $90,000. Salty Concrete’s balance sheet contained the following amounts at the time of the combination:
During each of the next three years, Salty reported net income of $50,000 and paid dividends of $20,000. On January 1, 20X5, Pepper sold 4,000 of the Salty $10 par value shares for $120,000 in cash. Pepper used the equity method in accounting for its ownership of Salty.
Required
a. Compute the balance in the investment account reported by Pepper on January 1, 20X5, before its sale of shares.
b. Prepare the entry recorded by Pepper when it sold the Salty shares.
c. Prepare the appropriate consolidation entries to complete a full worksheet for 20X5.
Step by Step Answer:
Advanced Financial Accounting
ISBN: 9781260772135
13th Edition
Authors: Theodore Christensen, David Cottrell, Cassy Budd