Problem 1 (60%)

Trial balance data for Pepper and Salt as of December 31, 2018 follows. Pepper company acquired (94%) when the book value of Salts net assets was equal to $350,000. Pepper uses the equity method to account for investments.

	Pepper Company		Salt Company
	Dr	Cr	Dr	Cr
Cash	500,000		99,000
Accounts receivable	168,000		82,000
Inventory	212,000		94,000
Investment in Salt	0
Land	210,000		91,000
Building and Equipment	714,000		190,000
Cost of Goods Sold	196,000		98,000
depreciation Expense	47,000		7,000
Selling & administrative Expense	223,000		40,000
Dividends declared	90,000		44,000
Accumulated Depreciation		444,000		16,000
Accounts Payable		64,000		49,000
Bonds Payable		182,000		70,000
Common Stock		483,000		200,000
Retained Earnings		356,300		150,000
Sales		830,700		260,000
Income from Salt				0
Total	2,360,000	2,360,000	745,000	745,000

Instructions:

a) Prepare the journal entries in Pepper Company books to record the transaction related to the investment in Salt.

1- Acquisition of (94%) of shares in Salt for (94%x $350,000) cash

2- December 31, 2018 received a cash dividends of $ $44,000 x (94%)

3- December 31, 2018 Salt determined its net income to be ($__).

b) Post the previous transactions to the ledger and find new balances.

c) Prepare a consolidated worksheet (show the eliminating entries outside the worksheet too)