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 $55,100Accounts receivable$44,700 Additional paid-in capital 50,000Buildings (net) (4-year remaining life) 163,000 Cash and short-term investments 83,750 Common stock 250,000Equipment (net) (5-year remaining life) 207,500 Inventory 122,000 Land 85,500 Long-term liabilities (mature 12/31/23) 162,500Retained earnings, 1/1/20 202,150Supplies 13,300 Totals$719,750 $719,750
During 2020, Abernethy reported net income of $105,000 while declaring and paying dividends of $13,000. During 2021, Abernethy reported net income of $136,750 while declaring and paying dividends of $36,000.
Assume that Chapman Company acquired Abernethy’s common stock for $605,600 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $101,800, its buildings were valued at $227,400, and its equipment was appraised at $164,500. Chapman uses the equity method for this 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.)