Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2020. As of that date, Abernethy has the following trial balance:

During 2020, Abernethy reported net income of $124,500 while declaring and paying dividends of $16,000.During 2021, Abernethy reported net income of $167,750 while declaring and paying dividends of $41,000.

Assume the Chapman Company acquired Abernethys common stock for $819,850 in cash. As of January 1, 2020, Abernethys land had a fair value of $141,900 its buildings were valued at $251,800, and its equipment was appraised at $306,750. Chapman uses the equity method for this investment.

Prepare consolidation worksheet entries for December 31, 2020 and December 31, 2021.

1. Prepare entry *C to convert parents beginning retained earnings to full accrual basis.
2. Prepare entry S to eliminate stockholders equity accounts of subsidiary.
3. Prepare entry A to recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as goodwill.
4. Prepare entry I to eliminate the income accrual for 2020 less the amortization recorded by the parent using the equity method.
5. Prepare entry D to eliminate intra-entity dividend transfers.
6. Prepare entry E to recognize current year amortization expense.
7. Prepare entry *C to convert parents beginning retained earnings to full accrual basis.
8. Prepare entry S to eliminate stockholders equity accounts of subsidiary for 2021.
9. Prepare entry A to recognize allocations attributed to specific accounts at acquisition date for 2021.
10. Prepare entry I to eliminate the income accrual for 2021 less the amortization recorded by the parent using the equity method.
11. Prepare entry D to eliminate intra-entity dividend transfer.
12. Prepare entry E to recognize current year amortization expense.

\begin{tabular}{|l|rr|rr|r} \hline Accounts payable & & & $ & 55,300 \\ \hline Accounts receivalbe & $ & 45,800 & & \\ \hline Additional paid-in capital & & & $ & 50,000 \\ \hline Buildings (net) (4-year remaining life) & $ & 197,000 & & \\ \hline Cash and short-term investments & $ & 81,500 & & \\ \hline Common stock & & & $ & 250,000 \\ \hline Equipment (net) (5-year remaining life) & $ & 345,000 & & \\ \hline Inventory & $ & 124,500 & & \\ \hline Land & $ & 125,000 & & \\ \hline Long-term liabilities (mature 12/31/23) & & & $ & 176,500 \\ \hline Retained earnings, 1/1/20 & & & $ & 402,900 \\ \hline Supplies & $ & 15,900 & & \\ \hline \multicolumn{1}{|c|}{ Totals } & $ & 934,700 & $ & 934,700 \\ \hline \hline \end{tabular}