Question 16 Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of
Question:
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
Expert Answer:
