In: Accounting
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 | $ | 57,600 | |||
Accounts receivable | $ | 40,600 | |||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 126,000 | ||||
Cash and short-term investments | 65,750 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 390,000 | ||||
Inventory | 100,000 | ||||
Land | 110,000 | ||||
Long-term liabilities (mature 12/31/20) | 187,500 | ||||
Retained earnings, 1/1/17 | 306,850 | ||||
Supplies | 19,600 | ||||
Totals | $ | 851,950 | $ | 851,950 | |
During 2017, Abernethy reported net income of $108,500 while declaring and paying dividends of $14,000. During 2018, Abernethy reported net income of $139,750 while declaring and paying dividends of $54,000.
Assume that Chapman Company acquired Abernethy’s common stock for $719,200 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $122,700, its buildings were valued at $185,200, and its equipment was appraised at $353,250. 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.)