Question
Tasks: Prepare entry A to recognize allocations determined above in connection with acquisition-date fair values. Prepare entry I to eliminate intra-entity dividend declarations recorded by
Tasks:
Prepare entry A to recognize allocations determined above in connection with acquisition-date fair values.
Prepare entry I to eliminate intra-entity dividend declarations recorded by parent as income.
Prepare entry E to recognize 2017 amortization expense.
Prepare entry *C to convert parent company figures to equity method by recognizing subsidiary's increase in book value for prior year [$104,500 net income less $13,000 dividend declaration] and excess amortizations for that period [$11,800].
Prepare entry A to recognize allocations relating to investmentbalances shown here are as of the beginning of the current year [original allocation less excess amortizations for the prior period]
Prepare entry I to eliminate intra-entity dividend declarations recorded by parent as income.
Prepare entry E to recognize 2018 amortization expense.
Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of that date, Abernethy has the following trial balance: Debit Credit $ 55,800 $ 42,500 50,000 209,000 67,250 250,000 Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies Totals 357,500 136,000 114,000 168,500 414,650 12,700 $938,950 $ 938,950 During 2017, Abernethy reported net income of $104,500 while declaring and paying dividends of $13,000. During 2018, Abernethy reported net income of $137,750 while declaring and paying dividends of $34,000. Assume that Chapman Company acquired Abernethy's common stock for $819,720 in cash. Assume that the equipment and long-term liabilities had fair values of $378,350 and $137,980, 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.)
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