Prepare the journal entries made by Pepper Co. to reflect the acquisition of Salt on 12/31/19 and the application of the equity method of accounting during the year ending 12/31/20 and complete the consolidation on 12/31/20.

Pepper Company, which is a calendar-year-reporting company, purchased 65% of the common stock of Salt Company, on December 31, 2019, for 20,000 shares of common stock of Pepper Company. On the acquisition date, Pepper Company shares had a par value of $5 per share and a market value of $17.25 per share. The total price paid for Salt Company shares represents 65% of the total fair value of Salt Company. On the acquisition date, the following net assets of Salt had fair values different than book value: Turnover = 4 times per year Inventory Land Buildings and equipment, net Patent Bonds payable Cost 80,000 70,000 150,000 FMV 95,000 115,000 215,000 81,000 125,000 20 year life 9 year life 10 years to maturity 150,000 During the year ending December 31, 2020, there were no transactions involving the stock of Salt Company. Consolidation Entries Debit Credit Consolidated Consolidation Date 12/31/20 Income Statement 2020 Sales Cost of sales Depreciation expense Interest expense Other expenses Income from Salt Pepper Co. (1,250,000) 520,000 30,000 7,000 338,000 64,838 Salt Co. (550,000) 370,000 32,000 15,000 203,000 Net (Income) Loss (290,162) 70,000 Statement of Retained Earnings Balances, beginning 1/1/20 Net (Income) Loss Dividends declared Balances, 12/31/20 (350,000) (290,162) 80,000 (560,162) 50,000 70,000 22,000 142,000 140,000 70,000 145,000 Balance Sheet as of 12/31/20 Cash Accounts receivable Inventory Investment in Salt Land Buildings and equipment Accumulated depreciation 128,000 95,300 115,000 265,862 100,000 651,000 (110,000) 100,000 320,000 (115,000) Total Assets 1,245,162 660,000 Payables and accruals Bonds payable Common stock Additional-paid-in capital Retained earnings / deficit (65,000) (20,000) (200,000) (400,000) (560,162) (447,000) (150,000) (45,000) (160,000) 142,000 Total Liab. and Equity (1,245,162) (660,000)