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 | $ | 50,000 | |||
Accounts receivable | $ | 40,000 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 120,000 | ||||
Cash and short-term investments | 60,000 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 200,000 | ||||
Inventory | 90,000 | ||||
Land | 80,000 | ||||
Long-term liabilities (mature 12/31/23) | 150,000 | ||||
Retained earnings, 1/1/20 | 100,000 | ||||
Supplies | 10,000 | ||||
Totals | $ | 600,000 | $ | 600,000 | |
During 2020, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2021, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000.
Assume that Chapman Company acquired Abernethys common stock for $490,000 in cash. As of January 1, 2020, Abernethys 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, 2020, and December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Debit Credit 50,000 $ $ 40,000 50,000 120,000 60,000 250,000 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 12/31/23) Retained earnings, 1/1/20 Supplies Totals 200,000 90,000 80,000 150,000 100,000 10,000 $600,000 $ 600,000 During 2020, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2021, 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, 2020, 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 investmentStep by Step Solution
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