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On January 1, 20X0, Pepper Corporation issued 6,000 of its $10 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt

On January 1, 20X0, Pepper Corporation issued 6,000 of its $10 par value shares to acquire 45 percent of the shares of Salt Manufacturing. Salt Manufacturings balance sheet immediately before the acquisition contained the following items:

SALT MANUFACTURING Balance Sheet January 1, 20X0
Book Value Fair Value
Assets
Cash and Receivables $ 30,000 $ 30,000
Land 70,000 80,000
Buildings and Equipment (net) 120,000 150,000
Patent 80,000 80,000
Total Assets 300,000
Liabilities & Equities
Accounts Payable $ 90,000 90,000
Common Stock 150,000
Retained Earnings 60,000
Total Liabilities & Equities $ 300,000

On the date of the stock acquisition, Pepper's shares were selling at $35, and Salt Manufacturings buildings and equipment had a remaining economic life of 10 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 $80,000 and $50,000 and paid dividends of $20,000 and $40,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing. Required: a. Prepare the entry recorded by Pepper Corporation at the time of acquisition. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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