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P5-25 Equity Entries with Differential LO 5-1 On January 1, 20x0, Pepper Corporation issued 9,000 of its $15 par value shares to acquire 45 percent
P5-25 Equity Entries with Differential LO 5-1 On January 1, 20x0, Pepper Corporation issued 9,000 of its $15 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 $ 39,000 Land 85,000 Buildings and Equipment (net) 132,000 Patent 95,000 Total Assets 351,000 Liabilities & Equities Accounts Payable $163,000 Common Stock 139,000 Retained Earnings 49,000 Total Liabilities & Equities $351,000 $ 39,000 95,000 162,000 95,000 163,000 On the date of the stock acquisition, Pepper's shares were selling at $40, 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 $82,000 and $52,000 and paid dividends of $26,000 and $42,000, 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.) Journal entry worksheet Record the acquisition of Salt Manufacturing. Note: Enter debits before credits. Event General Journal Debit Credit Investment in Salt Manufacturing Common stock Additional Paid-in capital Record entry Clear entry View general journal b-1. Prepare the journal entries recorded by Pepper during 20X0 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 Journal entry worksheet Record the acquisition of Salt Manufacturing. Note: Enter debits before credits. Event Debit Credit 1 General Journal Investment in Salt Manufacturing Common stock Additional paid-in capital Record entry Clear entry View general journal Journal entry worksheet
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