December $31$ Year $7.$ Pepper Company $,$ a public company $,$ agreed to a business combination with Salt Limited $,$ an unrelated private company Pepper issued $82$ of its common shares for all $50$ of the outstanding common shares of Sals transaction increased the number of outstanding Pepper shares from $100$ to $182.$ Pepper's shares were trading at $481.$ around per share in days leading up to the business combination $.$ The condensed balance sheets for the Pepper nies on this date prior to the transaction were as follows: PepperCarrying Amount: $$1,200$Tangible Assets: Carrying amount$=$ $$1,000$ Fair value$=$$$1200$Intangible Assets $($excluding goodwill$)$: Carrying amount$=$$$400$ Fair value$=$$$1000$Liabilities: Carrying amount$=$$$800$ Fair value$=$$$820$Shareholders' Equity: Carrying amount$=$$$600$ Fair value$=0$SaltTangible Assets: Carrying amount$=$ $$240$ Fair value$=$$$270$Intangible Assets $($excluding goodwill$)$: Carrying amount$=$$$560$ Fair value$=$$$840$Liabilities: Carrying amount$=$$$340$ Fair value$=$ $$390$Shareholders' Equity: Carrying amount$=$$$460$ Fair value$=0$CFO at Pepper stated that Salt must have been worth $$1,500$ if the unrelated third party was willing to pay $600$ for a On January Year $8$Pepper sold $40\%$ of its investment in Salt to an unrelated third party for $$600$ in cash The $40\%$ interest in Saft $.$ If so Pepper saved $$188$ by buying Salt for only $$1\mathrm{.}312$ Accordingly $,$ the CFO wants to recognize a gain of $$188$ in the Year $7$ income statement to reflect the true value of the Salt shares You have been asked by Cheryl Wozniak $,$ the CFO $,$ to prepare a presentation to senior management on the account ing implications for the business combination and subsequent sale of $40\%$ of the investment $.$ She would like you con sider two alternative methods of valuing Salt on the consolidated balance at the date of acquisition $-$ one based on cost of purchase and one based on the implied value of the subsidiary based on the sales price on January $1.$ Year. Prepare this presentation, answering the following questions How would Pepper's consolidated balance sheet differ at the date of acquisition under the different alternatives $?$ Which method best reflects economic reality $?$ Which method is required by GAAP

Make consolidated balance sheet under both the valuation