Question

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
Accounts payable				$	50,300
Accounts receivable	$	47,500
Additional paid-in capital					50,000
Buildings (net) (4-year remaining life)		201,000
Cash and short-term investments		61,750
Common stock					250,000
Equipment (net) (5-year remaining life)		447,500
Inventory		127,500
Land		124,000
Long-term liabilities (mature 12/31/20)					162,000
Retained earnings, 1/1/17					514,850
Supplies		17,900
Totals	$	1,027,150		$	1,027,150

During 2017, Abernethy reported net income of $97,000 while declaring and paying dividends of $12,000. During 2018, Abernethy reported net income of $141,250 while declaring and paying dividends of $48,000.

Assume that Chapman Company acquired Abernethy’s common stock by paying $935,850 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment.

Prepare the 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.)

• Prepare entry E.
• Prepare entry *C.
• Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary—the retained earnings balance has been adjusted for 2017 income and dividends.
• Prepare entry A to recognize original goodwill balance.
• Prepare entry I to eliminate Intra-entity Income accrual for the current year.
• Prepare entry D to eliminate Intra-entity dividend transfers.
• Prepare entry E.

Answer 1