Question
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2017. As of that date, Abernethy has the following trial balance: Debit Credit
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2017. As of that date, Abernethy has the following trial balance:
Debit | Credit | ||||
Accounts payable | $ | 55,100 | |||
Accounts receivable | $ | 44,700 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 163,000 | ||||
Cash and short-term investments | 83,750 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 207,500 | ||||
Inventory | 122,000 | ||||
Land | 85,500 | ||||
Long-term liabilities (mature 12/31/20) | 162,500 | ||||
Retained earnings, 1/1/17 | 202,150 | ||||
Supplies | 13,300 | ||||
Totals | $ | 719,750 | $ | 719,750 | |
During 2017, Abernethy reported net income of $105,000 while declaring and paying dividends of $13,000. During 2018, Abernethy reported net income of $136,750 while declaring and paying dividends of $36,000.
Assume that Chapman Company acquired Abernethys common stock for $605,600 in cash. As of January 1, 2017, Abernethys land had a fair value of $101,800, its buildings were valued at $227,400, and its equipment was appraised at $164,500. Chapman uses the equity method for this investment.
Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018.
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