Question: Exercise 8 (LO 3) Cost method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 7 for December 31, 20X2,

Exercise 8 (LO 3) Cost method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 7 for December 31, 20X2, are presented as follows:

Pepper Salt Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,000 115,000 Depreciable Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 200,000 Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,000) (40,000)

Investment in Salt Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (80,000)

Common Stock ($10 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,000) (100,000)

Retained Earnings, January 1, 20X2 . . . . . . . . . . . . . . . . . . . . . . . . (244,000) (170,000)

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000) (100,000)

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000 85,000 Dividend Income (from Salt Company) . . . . . . . . . . . . . . . . . . . . . . . (8,000)

Dividends Declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 Pepper Company continued to use the cost method.

1. Prepare all the eliminations and adjustments that would be made on the 20X2 consolidated worksheet.

2. If you did not solve Exercise 4 or 6, prepare the 20X2 consolidated income statement and its related income distribution schedules.

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