On January 1, 2013, Pasta Company purchased an 80% interest in Salsa Company for $152,000. On this date, Salsa Company reported capital stock and retained earnings of $100,000 and $90,000, respectively. During 2013, Salsa Company reported net income of $30,000 and declared a cash dividend of $35,000. At the end of 2014, Salsa Company was facing a cash shortage. Rather than distributing a cash dividend to the common stockholders, the board of directors elected to issue a 30% stock dividend. Salsa Company's accountant recorded the stock dividend as follows:

On December 31, 2014, Pasta Company purchased on the open market bonds of Salsa Company with a par value of $100,000 for $94,000. Financial data for the two companies as of December 31, 2014, follows:

* 8%, maturity date December 31, 2017.
Required:
A. Prepare a consolidated statements work paper on December 31, 2014.
B. Prepare in general journal form the entry that would be made in the December 31, 2015, work paper to establish reciprocity as of January 1, 2015.

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Stock Dividend Declared 30,000 Common Stock 30,000 Income Statement Sales Other Revenues Pasta Company $370,000 15,000 385,000 180,000 80,000 $125,000 Salsa Company $200,000 2,000 202,000 110,000 30,000 62,000 Cost of Goods Sold Other Expenses Net Income Retained Earnings 1/1 Retained Earnings Net Income Less: Dividends Declared Pasta Company $96,000 125,000 Salsa Company 85,000 62,000 Stock Dividend Declared (30.000) $191,000 (30,000) $117,000 12/31 Retained Earning:s Balance Sheet Current Assets Investment in Salsa Company Stock Investment in Salsa Company Bonds Other Assets Pasta Company $171,000 148,000 94,000 300,000 $713.000 S 72,000 250,000 Salsa Co mpany $169,000 315,000 $484,000 $ 40,000 Totals Accounts Payable Long-Term Bonds Payable Discount on Bonds Payable Common Stock ($10 par value) Retained Earnings 200,000* (3,000) 200,000 191,000 $713,000 130,000 $117,000 $484,000 Totals