C Postclosing trial balances d Either a or b, depending on the circumstances E 4-2 ) Lensolidated statement items with equity method Pan Corporation purchased 80 percent of the outstanding voting common stock of Sal Corporation on January 2, 2011, for $1,200,000 cash. Sal's balance sheets on this date and on December 31, 2011, are as follows: SAL CORPORATION BALANCE SHEETS January 2 December 31 Inventory $ 200,000 $ 80,000 Other current assets 200,000 320,000 Plant assets--net 800,000 880,000 Total assets $1,200,000 $1,280.000 Liabilities $ 200,000 $ 240,000 Capital stock 600,000 600,000 Retained earnings 400,000 440,000 Total equities $1,200,000 $1,280,000 ADDITIONAL INFORMATION 1. Pan uses the equity method of accounting for its investment in Sal. 2. Sal's 2011 net income and dividends were $280,000 and $240,000, respectively 3. Sal's inventory, which was sold in 2011, was undervalued by $50,000 at January 2, 2011. C Postclosing trial balances d Either a or b, depending on the circumstances E 4-2 ) Lensolidated statement items with equity method Pan Corporation purchased 80 percent of the outstanding voting common stock of Sal Corporation on January 2, 2011, for $1,200,000 cash. Sal's balance sheets on this date and on December 31, 2011, are as follows: SAL CORPORATION BALANCE SHEETS January 2 December 31 Inventory $ 200,000 $ 80,000 Other current assets 200,000 320,000 Plant assets--net 800,000 880,000 Total assets $1,200,000 $1,280.000 Liabilities $ 200,000 $ 240,000 Capital stock 600,000 600,000 Retained earnings 400,000 440,000 Total equities $1,200,000 $1,280,000 ADDITIONAL INFORMATION 1. Pan uses the equity method of accounting for its investment in Sal. 2. Sal's 2011 net income and dividends were $280,000 and $240,000, respectively 3. Sal's inventory, which was sold in 2011, was undervalued by $50,000 at January 2, 2011