On January 1, 2016, Pepper Company Purchased 90% of the Common

Essay

On January 1, 2016, Pepper Company purchased 90% of the common stock of Salt Company for $360,000 when Salt had total shareholders' equity as follows:
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$$\begin{array} { l r } 8 \% \text { Preferred Stock, } \$ 100 \text { par } & \$ 100,000 \\\text { Common Stock, } \$ 10 \text { par } & 50,000 \\\text { Other Paid-in Capital } & 120,000 \\\text { Retained Earnings } & 180,000 \\\quad \text { Total } & \$ 450,000\end{array}$$ Any excess of cost over book value on this date is attributed to a patent, to be amortized over 10 years.The 8% preferred stock is cumulative, non-participating, and has a liquidating value of par plus dividends in arrears.There were no preferred dividends in arrears on January 1, 2016.Pepper elected to account for its investment in Salt using the cost method.
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During 2016, Salt had a net loss of $10,000 and paid no dividends.In 2017, Salt had net income of $100,000 and paid dividends totaling $36,000.
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During 2017, Salt sold merchandise to Pepper for $40,000, of which $20,000 is still held by Pepper on December 31, 2017.Salt's usual gross profit is 40%.
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Required:
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Complete the Figure 7-8 worksheet for consolidated financial statements for the year ended December 31, 2017.
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