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 $ 55,100 Accounts receivable $ 44,700 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 163,000 Cash and short-term investments 83,750 Common stock 250,000 Equipment (net) (5-year remaining life) 207,500 Inventory 122,000 Land 85,500 Long-term liabilities (mature 12/31/20) 162,500 Retained earnings, 1/1/17 202,150 Supplies 13,300 Totals $ 719,750 $ 719,750 During 2017, Abernethy reported net income of $105,000 while declaring and paying dividends of $13,000. During 2018, 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, 2017, 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, 2017, and December 31, 2018.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 23E

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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				$	55,100
Accounts receivable	$	44,700
Additional paid-in capital					50,000
Buildings (net) (4-year remaining life)		163,000
Cash and short-term investments		83,750
Common stock					250,000
Equipment (net) (5-year remaining life)		207,500
Inventory		122,000
Land		85,500
Long-term liabilities (mature 12/31/20)					162,500
Retained earnings, 1/1/17					202,150
Supplies		13,300
Totals	$	719,750		$	719,750

During 2017, Abernethy reported net income of $105,000 while declaring and paying dividends of $13,000. During 2018, 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, 2017, 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, 2017, and December 31, 2018.

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