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Pepper Company acquired 90 percent of Salt Company's stock at underlying book value on January 1,...

Pepper Company acquired 90 percent of Salt Company's stock at underlying book value on January 1, 2008. At that date, the fair value of the non-controlling interest was equal to 10 percent of the book value of Salt Company. Salt Co. sold equipment to Pepper Co. for a $360,000 on December 31, 2008. Salt Co. had originally purchased the equipment for $400,000 on January 1, 2005, with a useful life of 10 years and no salvage value. At the time of the purchase, Pepper Co. estimated that the equipment still had the same remaining useful life. Both companies use straight-line depreciation. Pepper sold land costing $90,000 to Salt Company on June 28, 2009, for $122,000

  1. Prepare Pepper’s journal entries related to inter-company sale at December 31, 2009.
  2. Prepare the consolidation entries that related to inter-company sale of land at December 31, 2009.
  3. Prepare the consolidation entries that related to inter-company sale of equipment at December 31, 2009.
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Jounal of Pepper Company Jounal of Salt Company
Date Particulars Dr/ Cr Amount Amount Date Particulars Dr/ Cr Amount Amount
31.12.2008 Equipment A/c Dr 360000 31.12.2008 Pepper Company A/c Dr 360000
To Salt Company A/c Cr 360000 Accumulated Depreciation- Equipment A/c Dr 160000 (40000*4 years)
(Being Equipment acquired from Salt Company) To Equipment A/c Cr 400000
To Profit on sale of Equipment A/c Cr 120000
(Being Equiments sold to pepper Company)
28.06.2009 Salt Company A/c Dr 122000 28.06.2009 Land A/c Dr. 122000
To Land A/c Cr 90000 To Pepper Company A/c Cr. 122000
To Profit on sale of land A/c Cr 32000 (Being land bought from pepper company)
(Being land sold to Salt Company)
31.12.2009 Depreciation A/c Dr 36000
To Accumulated Depreciation- Equipment A/c Cr 36000
(Being Depreciation provided on Equiments)
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