Question
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Debit Credit
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2020. As of that date, Abernethy has the following trial balance:
Debit | Credit | ||||
Accounts payable | $ | 50,800 | |||
Accounts receivable | $ | 48,200 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 161,000 | ||||
Cash and short-term investments | 81,750 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 242,500 | ||||
Inventory | 135,500 | ||||
Land | 129,500 | ||||
Long-term liabilities (mature 12/31/23) | 167,000 | ||||
Retained earnings, 1/1/20 | 297,350 | ||||
Supplies | 16,700 | ||||
Totals | $ | 815,150 | $ | 815,150 | |
During 2020, Abernethy reported net income of $90,000 while declaring and paying dividends of $11,000. During 2021, Abernethy reported net income of $134,750 while declaring and paying dividends of $34,000.
Assume that Chapman Company acquired Abernethys common stock for $694,850 in cash. As of January 1, 2020, Abernethys land had a fair value of $140,700, its buildings were valued at $201,800, and its equipment was appraised at $217,250. Chapman uses the equity method for this investment.
Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started