4)A parent company uses the equity method to account for its wholly-owned subsidiary. Which of the following will be a correct procedure for the Investment account?

Select one:

a.A debit for a subsidiary loss and a debit for dividends received

b.A credit for subsidiary income and a debit for dividends received

c. A debit for subsidiary dividends received and a credit for a subsidiary loss

d.A credit for a subsidiary loss and a credit for dividends received

5)The balance sheets of Pepper and Salt Corporations at year-end 20X1 are summarized as follows:

		Pepper			Salt
Assets		$5,000,000			$2,000,000
Liabilities		$1,500,000		$ 500,000
Capital stock		2,500,000		1,000,000
Retained Earnings		1,000,000		500,000

On January 1, 20X2 Pepper purchased 100% of Salt Corporations outstanding shares for cash of $2,000,000 when the fair value of Salts net assets was $2,200,000. If a consolidated balance sheet is prepared immediately after the business combination, the consolidated stockholders equity will be:

Select one:

a.$ 5,500,000

b.$ 5,000,000

c.$ 3,500,000

d.$ 7,000,000