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				$	54,200
Accounts receivable	$	42,900
Additional paid-in capital					50,000
Buildings (net) (4-year remaining life)		192,000
Cash and short-term investments		73,500
Common stock					250,000
Equipment (net) (5-year remaining life)		245,000
Inventory		99,000
Land		128,500
Long-term liabilities (mature 12/31/20)					160,000
Retained earnings, 1/1/17					279,200
Supplies		12,500
Totals	$	793,400		$	793,400

During 2017, Abernethy reported net income of $120,500 while declaring and paying dividends of $15,000. During 2018, Abernethy reported net income of $172,000 while declaring and paying dividends of $40,000.

Assume that Chapman Company acquired Abernethy’s common stock for $714,650 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $139,200, its buildings were valued at $262,000, and its equipment was appraised at $218,000. 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.)

Answer 1

DATE	GENERAL JORNAL	DEBIT($)	CREDIT($)
DEC-31 2017
ENTRY S	COMMON STOCK-ABERNETHY                        DR	250000
	ADDITIONAL PAID UP CAPITAL                        DR	50000
	RETAINED EARNINGS                                           DR	279200
	TO INVESTMENT IN ABERNETHY		579200
ENTRY A	LAND                                                                        DR	10700
	BUILDINGS                                                             DR	70000
	GOODWILL                                                             DR	81750
	TO EQUIPMENT		27000
	TO INVESTMENT IN ABERNETHY		135450
ENTRY I	EQUITY IN SUBSIDIARY EARNINGS                   DR	108400
	TO INVESTMENT IN ABERNETHY		108400
ENTRY D	INVESTMENT IN ABERNETHY                            DR	15000
	TO DIVIDENDS PAID		15000
ENTRY E	DEPRECIATION EXPENSE                                   DR	12100
	EQUIPMENT                                                            DR	5400
	TO BUILDINGS		17500
31-Dec-18
ENTRY S	COMMON STOCK-ABERNETHY                        DR	250000
	ADDITIONAL PAID UP CAPITAL                        DR	50000
	RETAINED EARNINGS                                           DR	384700
	TO INVESTMENT IN ABERNETHY		684700
ENTRY A	LAND                                                                        DR	10700
	BUILDINGS                                                             DR	52500
	GOODWILL                                                             DR	81750
	TO EQUIPMENT		21600
	TO INVESTMENT IN ABERNETHY		123350
ENTRY I	EQUITY IN SUBSIDIARY EARNINGS                   DR	159900
	TO INVESTMENT IN ABERNETHY		159900
ENTRY D	INVESTMENT IN ABERNETHY                            DR	40000
	TO DIVIDENDS PAID		40000
ENTRY E	DEPRECIATION EXPENSE                                   DR	12100
	EQUIPMENT                                                            DR	5400
	TO BUILDINGS		17500