ElELCSeCost method, second year, eliminations, statements. The trial balances of

Question

ElELCSeCost method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 7 for December 31, 20X2, are presented as follows: Pepper 152,000 400,000 Salt 115,000 200,000 (130,000 (40,000) Depreciabled Assets . .. . _ . . . Investment in Salt Company 250,000 (80,000) . Common Stock ($10 par) . .. Retained Earnings, January 1, 20X2 Sales . (300,000 (100,000) 244,000 (170,000 (200,000) (100,000) 85,000 160,000 (8,000) 10,000 Total... 0 Pepper Company continued to use the cost method worksheet. related income distribution schedules. 1. Prepare all the eliminations and adjustments that would be made on the 20X2 consolidated 2. If you did not solve Exercise 4 or 6, prepare the 20X2 consolidated income statement and its

Explanation / Answer

Solution:

1) Preparing all the Elimination and Adjustments that would be Made on the 20X1 Consolidated Worksheet:

2) Preparing the 20X1 Consolidated Income Statement and its Related Distribution Schedules:

Pepper Company and Salt Company

Consolidated Income Statement

For Year Ended December 31, 20X1

Event General Journal Debit Credit CY1 Subsidiary Income $7,000 Investment in Salt Company $7,000 CY2 Investment in Salt Company $8,000 Dividends Declared $8,000 EL Common Stock - Salt $80,000 Retained Earnings - Salt $136,000 Investment in Salt Company $216,000 D Depreciable Fixed Assets* $50,000 Investment in Salt Company $45,000 Accumulated Depreciation $5,000 *No accumulated depreciation existed on the date of acquisition A Depreciation Expense $5,000 Accumulated Depreciation $5,000

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