Question: Pepper Home Builders Inc. acquired 80 percent
Pepper Home Builders Inc. acquired 80 percent of Salty Concrete Works stock on January 1, 20X3, for $360,000. At that date, the fair value of the non controlling interest was $90,000. Salty Concrete’s balance sheet contained the following amounts at the time of the combination: 
During each of the next three years, Salty reported net income of $50,000 and paid dividends of $20,000. On January 1, 20X5, Pepper sold 4,000 of the Salty $10 par value shares for $120,000 in cash. Pepper used the equity method in accounting for its ownership of Salty. Required: a. Compute the balance in the investment account reported by Pepper on January 1, 20X5, before its sale of shares. b. Prepare the entry recorded by Pepper when it sold the Salty shares. c. Prepare the appropriate consolidation entries to complete a full worksheet for 20X5.
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Cash $ 30,000 Accounts Payable S 50,000 Accounts Receivable 65,000 Bonds Payable 300,000 Inventory 15,000 Common Stock 200,000 Construction Work in Progress 470,000 Retained Earnings 250,000 Other Assets (net) 220,000 Total Assets S800,000 Total Liabilities & Equities S800,000
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