4110.6

On January 1, 20X0, Pepper Corporation issued 9,000 of its $10 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, 20xo Book Value Fair Value Assets Cash and Receivables Land Buildings and Equipment (net) Patent 43,000 79,000 128,000 89,000 339,000 43,000 89,000 158,000 89,000 Total Assets Liabilities & Equities Accounts Payable Common Stock Retained Earnings $145,000 142,000 52,000 $339,000 145,000 Total Liabilities &Equities On the date of the stock acquisition, Pepper's shares were selling at $35, and Salt Manufacturing's buildings and equipment had a remaining economic life of 5 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 $90,000 and $60,000 and paid dividends of $29,000 and $50,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing