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 | $ | 53,700 | |||
Accounts receivable | $ | 41,000 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 184,000 | ||||
Cash and short-term investments | 77,250 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 400,000 | ||||
Inventory | 117,500 | ||||
Land | 107,500 | ||||
Long-term liabilities (mature 12/31/23) | 173,000 | ||||
Retained earnings, 1/1/20 | 417,450 | ||||
Supplies | 16,900 | ||||
Totals | $ | 944,150 | $ | 944,150 | |
During 2020, Abernethy reported net income of $98,000 while declaring and paying dividends of $12,000. During 2021, Abernethy reported net income of $128,250 while declaring and paying dividends of $39,000.
Assume that Chapman Company acquired Abernethys common stock for $851,300 in cash. As of January 1, 2020, Abernethys land had a fair value of $124,200, its buildings were valued at $254,400, and its equipment was appraised at $378,500. Chapman uses the equity method for this investment.
Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.
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