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: 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 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 $81,000 and $51,000 and paid dividends of $26,000 and $41,000, respectively. Pepper used the equity method in accounting for its ownership of Salt Manufacturing.

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Fair Value SALT MANUFACTURING Balance Sheet January 1, 20x0 Book Value Assets Cash and Receivables $ 40,000 Land 79,000 Buildings and Equipment (net) 131,000 Patent 89,000 Total Assets 339,000 Liabilities & Equities Accounts Payable $133,000 Common Stock 148,000 Retained Earnings 58,000 Total Liabilities & Equities $339,000 $ 40,000 89,000 161,000 89,000 133,000 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: Fair Value SALT MANUFACTURING Balance Sheet January 1, 20x0 Book Value Assets Cash and Receivables $ 40,000 Land 79,000 Buildings and Equipment (net) 131,000 Patent 89,000 Total Assets 339,000 Liabilities & Equities Accounts Payable $133,000 Common Stock 148,000 Retained Earnings 58,000 Total Liabilities & Equities $339,000 $ 40,000 89,000 161,000 89,000 133,000 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 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 $81,000 and $51,000 and paid dividends of $26,000 and $41,000, 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.) View transaction list View journal entry worksheet No Event General Journal Debit Credit A 1 Investment in Salt Manufacturing Common stock Additional Paid-in capital View transaction list View journal entry worksheet No Event General Journal Debit Credit 1 Investment in Salt Manufacturing Common stock Additional paid-in capital c B 2 Cash Investment in Salt Manufacturing 3 Investment in Salt Manufacturing Income from Salt Manufacturing D 4 Income from Salt Manufacturing Investment in Salt Manufacturing b-2. Prepare the journal entries recorded by Pepper during 20X1 related to its investment in Salt Manufacturing. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list View journal entry worksheet No Event General Journal Debit Credit A 1 Cash Investment in Salt Manufacturing B 2 Investment in Salt Manufacturing Income from Salt Manufacturing C 3 Income from Salt Manufacturing Investment in Salt Manufacturing c. What balance will be reported in Pepper's investment account on December 31, 20X1? Investment account balance