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errec'ses') 4) Sophisticated equity method, first year, eliminations, state- ments. (Note: Read carefilly. This is not the same as Exercise 3.) Pepper Company purchased an

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errec'ses') 4) Sophisticated equity method, first year, eliminations, state- ments. (Note: Read carefilly. This is not the same as Exercise 3.) Pepper Company purchased an 80% interest in Salt Company for $250,000 on January 1, 20X1, when Salt Company had the following balance sheet: Assets Liabilities and Equi $50,000 100,000 150,000 $300,000 Depreciable fixed assets 200,000 Comon stock ($10 par)... Retained earnings Total assets. $300,000 Total liabilities and equity Any excess of the price paid over book value is attributable only to the fixed assets, which have a 10-ycar remaining life. Pepper uses the sophisticated equity method to record the invest- ment in Salt Compan The following trial balances of the two companies were prepared on December 31, 20X1: Salt 60,000 ..400,000 130,000 200,000 106,000 (20,000) Depreciable Fixed Assets . Accumulated Depreciation Investment in Salt Company Current Liabilities Common Stock ($10 par) .. 261,000 (60,000) (40,000) (300,000 100,000) (200,000 150,000) (150,000) (100,000) 75,000 Sales Expenses Subsidiary Income (from Salt Company). Dividends Declared 110,000 (15,000 5,000 Total

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