Exercise 6 (LO 4) Sophisticated equity method, second year, eliminations, income statement. The trial balances of Pepper and Sultan companies of Exercise 5 for December 31, 20X2, are presented as follows:

	Pepper		Sultan
Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152,000		115,000
Depreciable Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	400,000		200,000
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(130,000)		(40,000)
Investment in Sultan Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	260,000
Current Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(80,000)
Common Stock ($10 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(300,000)		(100,000)
Retained Earnings, January 1, 20X2. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(255,000)		(170,000)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	(200,000)		(100,000)
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160,000		85,000
Subsidiary Income (from Sultan Company) . . . . . . . . . . . . . . . . . . . . . . . .	(7,000)
Dividends Declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			10,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	0		0

Pepper Company continues to use the sophisticated equity 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, prepare the 20X2 consolidated income statement and its related income distribution schedules.