Pepper, Inc., purcashed 80% of the outstanding stock of the Salt Company on January 01, 2017, for $2,750,000 cash.

At that date, Salt Company's assets and liabilities had the following fair values and book values:

	FMV	BV
cash and receivables	1400000	1400000
inventory	1792000	1600000
plant assets	5250000	5040000
curret liabilities	(3500000)	(3500000)
long term debt	(1800000)	(1800000)

All of Salt Company's inventory was sold in the following year.

Salt Company depreciates plant assets over a 20-year life.

Pepper, Inc. amortizes debt premiums and discounts over its 6 years to maturity using straight-line amortization.

Pepper, Inc. accounts for this investment using the equity method.

The financial statements for both companies for the year ended December 31, 2017, are shown below:

INCOME STATEMENT
For the Period Ending December 31 2017
(a)Pepper, Inc. (b)Salt Company
Revenue (a)$14,000,000 (b)$7,000,000
Income From Sub. (a)678,000 (b)0

Total Revenue (a)14678000 (b)7000000
Cost Of Sales (a)8,000,000 (b)4,250,000
Operating Expenses (a)2,500,000 (b)1,600,000
Interest Expense (a)250,000 (b)150,000

Total Expenses (a)10750000 (b)6000000

Net Income (a)3928000 (b)1000000
STATEMENT OF
RETAINED EARNINGS
-
Begining Balance (a)$4,000,000 (b)$2,540,000

add: net income (a)3928000 (b)1000000
Deduct: Dividends (a)600,000 (b)120,000

Ending Balance (a)7328000 (b)3420000

Balance Sheet
As of December 31 2015
		Pepper, Inc.	Salt Company
Assets
Cash and Receivables		$ 2,800,000	$ 1,200,000
Inventory		3,600,000	1,070,000
Plant Assets		5,500,000	4,800,000	(net)
Accumulated Depreciation		(2,500,000)
Investment in Sub.		3,332,000
Total assets		12732000	7070000
Liabilities and Equities
Current Liabilities		$ 1,654,000	$ 1,400,000
Long-Term Debt		2,250,000	1,750,000
Capital Stock		1,500,000	500,000

Retained Earnings 7328000 3420000

Total liab. and equity 12732000 7070000

(1)Using the above data and Excel, prepare a consolidated worksheet for the period ending December 31, 2017. Be sure all input data is in a separate part of the schedule so that the solution will change with changes

(2)Include subschedules to calculate goodwill and the equity method subsidiary income for the period

(3)By linking to the work paper prepared in part 1, prepare a formal consolidated income statement, retained earnings statement, and balance sheet as of December 31, 2017

(a) is for pepper (b) is for salt