Pepper Company Owned 60,000 of Salt Company's 100,000 Outstanding Shares

Multiple Choice

Pepper Company owned 60,000 of Salt Company's 100,000 outstanding shares.On January 2, 2018, Salt purchased 20,000 of its outstanding shares from the NCI for $70,000.Pepper purchased its shares on January 1, 2016, at which time the fair value of Salt exceeded its book value by $50,000.This difference was due to machinery that was undervalued and had a remaining life of 5 years.On December 31, 2017, Salt Company had the following stockholders' equity:

$\begin{array}{lr}\text { Common stock, } \$ 1 \text { par } & \$ 100,000 \\\text { Paid-in capital in excess of par } & 50,000 \\\text { Retained earnings } & 270,000\end{array}$
The amount of the adjustment to Pepper's equity would be a:

A) $15,000 increase
B) $3,000 increase
C) $10,500 increase
D) $15,000 decrease