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 | $ | 59,900 | |||
Accounts receivable | $ | 43,700 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 123,000 | ||||
Cash and short-term investments | 80,500 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 270,000 | ||||
Inventory | 138,500 | ||||
Land | 118,500 | ||||
Long-term liabilities (mature 12/31/23) | 175,000 | ||||
Retained earnings, 1/1/20 | 257,100 | ||||
Supplies | 17,800 | ||||
Totals | $ | 792,000 | $ | 792,000 | |
During 2020, Abernethy reported net income of $112,000 while declaring and paying dividends of $14,000. During 2021, Abernethy reported net income of $163,250 while declaring and paying dividends of $54,000.
Assume that Chapman Company acquired Abernethys common stock for $651,550 in cash. As of January 1, 2020, Abernethys land had a fair value of $132,100, its buildings were valued at $166,600, and its equipment was appraised at $242,750. Chapman uses the equity method for this investment.
Prepare entry *C to convert parent's beginning retained earnings to full accrual basis. Need this for both 2020 and 2021
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