Sophisticated equity method, second year, eliminations, income statement. The trial balances of Pepper and Sultan companies of Exercise 5 for December 31, 20X2, are presented as follows:
|
|
Pepper
|
Sultan
|
|
Current Assets
|
152,000
|
115,000
|
|
Depreciable Fixed Assets
|
400,000
|
200,000
|
|
Accumulated Depreciation
|
(130,000)
|
(40,000)
|
|
Investment in Sultan Company
|
260,000
|
|
|
Current Liabilities
|
(80,000)
|
|
|
Common Stock ($10 par)
|
(300,000)
|
(100,000)
|
|
Retained Earnings, January 1, 20X2
|
(255,000)
|
(170,000)
|
|
Sales
|
(200,000)
|
(100,000)
|
|
Expenses
|
160,000
|
85,000
|
|
Subsidiary Income (from Sultan Company)
|
(7,000)
|
|
|
Dividends Declared
|
|
10,000
|
|
Totals
|
0
|
0
|
Pepper Company continues to use the sophisticated equity method.
1. Prepare all the eliminations and adjustments that would be made on the 20X2 consolidated worksheet.
2. Prepare the 20X2 consolidated income statement and its related income distribution schedules.