Question 16

Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of that date, Abernethy has the following trial balance:

DebitCreditAccounts payable$53,700Accounts receivable$41,000Additional paid-in capital50,000Buildings (net) (4-year remaining life)184,000Cash and short-term investments77,250Common stock250,000Equipment (net) (5-yearremaining life)400,000Inventory117,500Land107,500Long-term liabilities (mature 12/31/20)173,000Retained earnings, 1/1/17417,450Supplies16,900Totals$944,150$944,150

During 2017, Abernethy reported net income of $98,000 while declaring and paying dividends of $12,000. During 2018, Abernethy reported net income of $128,250 while declaring and paying dividends of $39,000.

Assume that Chapman Company acquired Abernethy's common stock for $825,690 in cash. Assume that the equipment and long-term liabilities had fair values of $422,400 and $139,760, respectively, on the acquisition date. Chapman uses the initial value method to account for its 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.)

1December 31, 2017Common stock - Abernethyselected answer correct

250,000selected answer correct

not attempted

Additional paid-in capitalselected answer correct

50,000selected answer correct

not attempted

Retained earnings - 1/1/17selected answer correct

417,450selected answer correct

not attempted

Investment in Abernethyselected answer correct

not attempted

717,450selected answer correct

2December 31, 2017Goodwillselected answer correct

16,700selected answer incorrect

not attempted

Equipmentselected answer correct

70,400selected answer incorrect

not attempted

Long-term liabilitiesselected answer correct

68,250selected answer incorrect

not attempted

Investment in Abernethyselected answer correct

not attempted

21,500selected answer incorrect

not attempted

not attempted

133,850selected answer incorrect

3December 31, 2017Dividend incomeselected answer correct

not attempted

not attempted

Dividends declaredselected answer correct

not attempted

not attempted

4December 31, 2017Depreciation expenseselected answer correct

not attempted

not attempted

Interest expenseselected answer correct

not attempted

not attempted

Equipmentselected answer correct

not attempted

not attempted

Long-term liabilitiesselected answer correct

not attempted

not attempted

5December 31, 2018Investment in Abernethyselected answer correct

not attempted

not attempted

Retained earnings - 1/1/18selected answer correct

not attempted

not attempted

6December 31, 2018Common stock - Abernethyselected answer correct

not attempted

not attempted

Additional paid-in capitalselected answer correct

not attempted

not attempted

Retained earnings - 1/1/18selected answer correct

not attempted

not attempted

Investment in Abernethyselected answer correct

not attempted

not attempted

7December 31, 2018Dividend incomeselected answer incorrect

not attempted

not attempted

Dividends declaredselected answer incorrect

not attempted

not attempted

Goodwillselected answer correct

not attempted

not attempted

Equipmentselected answer incorrect

not attempted

not attempted

Investment in Abernethyselected answer incorrect

not attempted

not attempted

8December 31, 2018Investment in Abernethyselected answer incorrect

not attempted

not attempted

Retained earnings - 1/1/18selected answer incorrect

not attempted

not attempted

9December 31, 2018Depreciation expenseselected answer correct

not attempted

not attempted

Interest expenseselected answer correct

not attempted

not attempted

Equipmentselected answer correct

not attempted

not attempted

Long-term liabilities