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

Question

ElELaSECost method, second year, eliminations, statements. The trial balances of Pepper and Salt companies of Exercise 7 for December 31, 20X2, are presented as follows: Salt 115,000 200,000 Current Assets Depreciable Fixed Assets Accumulated Depreciation Investment in Salt Company.. Current Liabilities Common Stock ($10 par) Retained Earnings, January 1, 20X2 Sales 152,000 400,000 (130,000)(40,000) 250,000 (80,000) 300,000) 100,000] 244,000 (170,000] 200,000 100,000) 160,000 85,000 Dividend Income (from Salt Company) Dividends Declared (8,000} 10,000 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 Refferances: ExeKcus 73) Cost method, first year, eliminations, statements. (Note: Read ar lly.This 1s nor the same as Errte 3 or 5.) Pepper Company purchased an g0% interest n Salt Company for $250,000 in cash on January 1, 20X1, when Salt Company had the following balance sheet Liabilities and E $50,000 100,000 150,000 $300,000 Current assets Depreciablé fxed assun $100,000 Current liobilities 200,000 nck ($10 parl Retained eornings $300,000 Total liobilities and equity Any excess of the price paid over book value is attributable only to the fixed assets, which have a 10-year remaining life. Pepper Company uses the cost method to record its investment in Salt Company. prepared on December 31, 20x1 Salt The following trial balances of the two companies were 60,000 400,000 (106,00 250,000 130,000 200,000 (20,000) Current Assets Depreciable Fixed Assets Investment in Salt Company Current Liabilities Common Stock ($10 parl Retained Earnings,January 1, 20x2 Sales 60,000, (40,000) 300,000) (100,000) (200,000) {150,000, 50,000(100,000) 110,000 75,000 (4,000] Dividend Income (from Salr Company) Dividends Declared 5,000 Total 1. If you did not solve Exercise 3 or 5, prepare a determination and distribution of excesssche dule for the investment. 2. Prepare all the eliminations and adjustments that would be made on the 20X1 consolidated 3. If you did not solve Exercise 3 or 5, prepare the 20X1 consolidated income statement and its related income distribution schedules. 4. Ifyou did not solve Exercise 3 or 5, prepare the 20X1 consolidated balance sheet.

Explanation / Answer

Solution:

8) 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

7) 1) Preparing a Determination and Distribution of Excess Schedule for the Investment:

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

3) 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

4) Preparing the 20X1 Consolidated Balance Sheet:

Pepper Company and Salt Company

Consolidated Balance Sheet

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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