Question
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2023. As of that date, Abernethy has the following trial balance: During 2023,
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2023. As of that date, Abernethy has the following trial balance:
During 2023, Abernethy reported net income of $124,500 while declaring and paying dividends of $16,000. During 2024, Abernethy reported net income of $167,750 while declaring and paying dividends of $41,000.
Assume that Chapman Company acquired Abernethys common stock for $813,060 in cash. Assume that the equipment and long-term liabilities had fair values of $368,400 and $143,940, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.
Required:
Prepare consolidation worksheet entries for December 31, 2023, and December 31, 2024.
\begin{tabular}{lrr} Accounts payable Debit & \multicolumn{1}{c}{ Credit } \\ Accounts receivable & $45,800 & $55,300 \\ Additional paid-in capital & - & - \\ Buildings (net) (4-year remaining life) & 197,000 & 50,000 \\ Cash and short-term investments & 81,500 & - \\ Common stock & - & 250,000 \\ Equipment (net) (5-year remaining life) & 345,000 & - \\ Inventory & 124,500 & - \\ Land & 125,000 & - \\ Long-term liabilities (mature 12/31/26) & - & 176,500 \\ Retained earnings, 1/1/23 & - & 402,900 \\ Supplies & 15,900 & - \\ Totals & \multicolumn{1}{c}{$934,700} & $934,700 \\ \hline \end{tabular}Step by Step Solution
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