Question
Problem 3-19 (LO 3-3a) Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2017. As of that date, Abernethy has the following
Problem 3-19 (LO 3-3a)
Chapman Company obtains 100 percent of Abernethy Companys stock on January 1, 2017. As of that date, Abernethy has the following trial balance:
Debit | Credit | ||||
Accounts payable | $ | 51,900 | |||
Accounts receivable | $ | 43,100 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 175,000 | ||||
Cash and short-term investments | 75,500 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 439,500 | ||||
Inventory | 127,000 | ||||
Land | 116,500 | ||||
Long-term liabilities (mature 12/31/20) | 170,500 | ||||
Retained earnings, 1/1/17 | 464,900 | ||||
Supplies | 10,700 | ||||
Totals | $ | 987,300 | $ | 987,300 | |
During 2017, Abernethy reported net income of $87,000 while declaring and paying dividends of $11,000. During 2018, Abernethy reported net income of $122,500 while declaring and paying dividends of $55,000.
Assume that Chapman Company acquired Abernethys common stock for $873,250 in cash. As of January 1, 2017, Abernethys land had a fair value of $129,800, its buildings were valued at $243,800, and its equipment was appraised at $403,750. Chapman uses the equity method for this investment.
Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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