$1$

On January $1,20$X$0,$ Pepper Corporation issued $7,000$ of its $\backslash (\backslash$$ $10\backslash )$ par value shares to acquire $45$ percent of the shares of Salt Manufacturing. Salt Manufacturing's balance sheet immediately before the acquisition contained the following items:

On the date of the stock acquisition, Pepper's shares were selling at $\backslash (\backslash$$ $35\backslash ),$ and Salt Manufacturing's buildings and equipment had a remaining economic life of $10$ years. The amount of the differential assigned to goodwill is not impaired.

In the two years following the stock acquisition, Salt Manufacturing reported net income of $\backslash (\backslash$$ $89,000\backslash )$ and $\backslash (\backslash$$ $59,000\backslash )$ and paid dividends of $\backslash (\backslash$$ $30,000\backslash )$ and $\backslash (\backslash$$ $49,000\backslash ),$ respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing.

Required:

a$.$ Prepare the entry recorded by Pepper Corporation at the time of acquisition.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

A

Record the acquisition of Salt Manufacturing.

Note: Enter debits before credits.

b$-1.$ Prepare the journal entries recorded by Pepper during $20$X$0$ related to its investment in Salt Manufacturing. Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

A

B

C

D

Record the acquisition of Salt Manufacturing.

Note: Enter debits before credits.

b$-2.$ Prepare the journal entries recorded by Pepper during $20$X$1$ related to its investment in Salt Manufacturing. Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

Journal entry worksheet

A

B

C

Record the dividends received from Salt Manufacturing.

Note: Enter debits before credits. c$.$ What balance will be reported in Pepper's investment account on December $31,20$X$1?$

Investment account balance