In: Accounting
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance:
Debit CreditAccounts payable $55,800Accounts receivable$42,500 Additional paid-in capital 50,000Buildings (net) (4-year remaining life) 209,000 Cash and short-term investments 67,250 Common stock 250,000Equipment (net) (5-year remaining life) 357,500 Inventory 136,000 Land 114,000 Long-term liabilities (mature 12/31/23) 168,500Retained earnings, 1/1/20 414,650Supplies 12,700 Totals$938,950 $938,950
During 2020, Abernethy reported net income of $104,500 while declaring and paying dividends of $13,000. During 2021, 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, 2020, and December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)