On January 1, 20X0, Pepper Corporation issued 10,000 of its $15 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturing’s balance sheet immediately before the acquisition contained the following items: SALT MANUFACTURING Balance Sheet January 1, 20X0 Book Value Fair Value Assets Cash and Receivables $ 48,000 $ 48,000 Land 77,000 87,000 Buildings and Equipment (net) 137,000 167,000 Patent 87,000 87,000 Total Assets 349,000 Liabilities & Equities Accounts Payable $ 153,000 153,000 Common Stock 143,000 Retained Earnings 53,000 Total Liabilities & Equities $ 349,000 On the date of the stock acquisition, Pepper's shares were selling at $40, and Salt Manufacturing’s buildings and equipment had a remaining economic life of 10 years. The amount of the differential assigned to goodwill is not impaired. In the two years following the stock acquisition, Salt Manufacturing reported net income of $88,000 and $58,000 and paid dividends of $30,000 and $48,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing. Required: a. Prepare the entry recorded by Pepper Corporation at the time of acquisition.
On January 1, 20X0, Pepper Corporation issued 10,000 of its $15 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturing’s balance sheet immediately before the acquisition contained the following items: SALT MANUFACTURING Balance Sheet January 1, 20X0 Book Value Fair Value Assets Cash and Receivables $ 48,000 $ 48,000 Land 77,000 87,000 Buildings and Equipment (net) 137,000 167,000 Patent 87,000 87,000 Total Assets 349,000 Liabilities & Equities Accounts Payable $ 153,000 153,000 Common Stock 143,000 Retained Earnings 53,000 Total Liabilities & Equities $ 349,000 On the date of the stock acquisition, Pepper's shares were selling at $40, and Salt Manufacturing’s buildings and equipment had a remaining economic life of 10 years. The amount of the differential assigned to goodwill is not impaired. In the two years following the stock acquisition, Salt Manufacturing reported net income of $88,000 and $58,000 and paid dividends of $30,000 and $48,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing. Required: a. Prepare the entry recorded by Pepper Corporation at the time of acquisition.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 20X0, Pepper Corporation issued 10,000 of its $15 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturing’s balance sheet immediately before the acquisition contained the following items:
| SALT MANUFACTURING | ||
| Balance Sheet | ||
| January 1, 20X0 | ||
| Book Value | Fair Value | |
|---|---|---|
| Assets | ||
| Cash and Receivables | $ 48,000 | $ 48,000 |
| Land | 77,000 | 87,000 |
| Buildings and Equipment (net) | 137,000 | 167,000 |
| Patent | 87,000 | 87,000 |
| Total Assets | 349,000 | |
| Liabilities & Equities | ||
| Accounts Payable | $ 153,000 | 153,000 |
| Common Stock | 143,000 | |
| 53,000 | ||
| Total Liabilities & Equities | $ 349,000 |
On the date of the stock acquisition, Pepper's shares were selling at $40, and Salt Manufacturing’s buildings and equipment had a remaining economic life of 10 years. The amount of the differential assigned to
In the two years following the stock acquisition, Salt Manufacturing reported net income of $88,000 and $58,000 and paid dividends of $30,000 and $48,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing.
Required:
a. Prepare the entry recorded by Pepper Corporation at the time of acquisition.
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