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Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of that date, Abernethy has the following trial balance Credit $
Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of that date, Abernethy has the following trial balance Credit $ 50,000 Debit Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/20) Retained earnings Supplies 40,000 50,000 120,000 60,000 250,000 200,000 90,000 80,000 150,000 100,000 , 1/1/17 10,000 $600,000 Totals 600,000 During 2017, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2018, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000. Assume that Chapman Company acquired Abernethy's common stock for $490,000 in cash. As of January 1, 2017, Abernethy's land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $180,000. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Consolidation Worksheet Entries 123 4 56 7 8 9 10 epare entry S te elimnnatesocaholdern' euicounts of subudary. Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2017 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K123 4 56 7 8 9 10 Prepare entry A to recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as goodvil Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2017 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12345 678 9 10 Prepare entry I to eliminate $80,000 income accrual for 2017 less $6,000 amortization recorded by parent using equity method Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2017 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 345 678 9 10 Prepare entry D to eliminate intra-entity dividend transfers. Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2017 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 3 456 78 9 10 Prepare entry E to recognize current year amortization expense Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2017 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 3 4 5 678 9 10 Prepare entry S to eliminate beginning stockholders' equity of subsidiary-the Retained Earnings account has been adjusted for 2017 income and dividends. Entry *C is not needed because equity method was applied. Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2018 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 3 4 5 678 9 10 Prepare entry A to recognize allocations relating to investment-balances shown here are as of beginning of current year [original allocation less excess amortizations for the prior period] Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2018 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 3 4 5 678 9 10 Prepare entry I to eliminate $110,000 income accrual less $6,000 amortization recorded by parent during 2018 using equity method. Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2018 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 3 4 5 678 910 Prepare entry D to eliminate intra-entity dividend transfers. Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2018 Record entry Clear entry view consolidation entries Consolidation Worksheet Entries K12 3 4 5 678 910 Prepare entry E to recognize current year amortization expense. Note: Enter debits before credits. Date Accounts Debit Credit December 31, 2018 Record entry Clear entry view consolidation entries
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