Chapman Company obtains 100 percent o Abernethy Companys stock on January 1, 2017. As of that date, Abernethy has the following trial balance:

During 2017, Abernethy reported net income of $122,000 while declaring and paying dividends of $15,000. During 2018, Abernethy reported net income of $175,000 while declaring and paying dividends of $55,000.

Assume that Chapman Company acquired Abernethys common stock for $854,460 in cash. Assume that the equipment and long-term liabilities had fair values of $440,150 and $131,640, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.

Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018.

1.Prepare entry S to eliminate stockholders' equity accounts of subsidiary.

2.Prepare entry A to recognize allocations determined above in connection with acquisition-date fair values.

3.Prepare entry I to eliminate intra-entity dividend declarations recorded by parent as income.

4.Prepare entry E to recognize 2017 amortization expense.

5.Prepare entry *C to convert parent company figures to equity method by recognizing subsidiary's increase in book value for prior year [$80,000 net income less $10,000 dividend declaration] and excess amortizations for that period [$11,500].

6.Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary. The retained earnings balance has been adjusted for 2017 net income and dividends.

7.Prepare entry A to recognize allocations relating to investmentbalances shown here are as of the beginning of the current year [original allocation less excess amortizations for the prior period].

8.Prepare entry I to eliminate intra-entity dividend declarations recorded by parent as income.

9.Prepare entry E to recognize 2018 amortization expense.

Debit Credit Accounts payable 58, 300 $43, 500 Accounts receivable Additional paid-in cap:ital Buildings (net) (4year remaining life) 50, 000 210, 000 83, 250 Cash and short-term investments 250, 000 Common stock Equipment (net) (5-year remaining life) Inventory 417, 500 95, 000 103, 000 Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies 163, 000 445, 850 14, 900 $ 967, 150 $967, 150 Totals Debit Credit Accounts payable 58, 300 $43, 500 Accounts receivable Additional paid-in cap:ital Buildings (net) (4year remaining life) 50, 000 210, 000 83, 250 Cash and short-term investments 250, 000 Common stock Equipment (net) (5-year remaining life) Inventory 417, 500 95, 000 103, 000 Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies 163, 000 445, 850 14, 900 $ 967, 150 $967, 150 Totals