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 Credit $ 57,300 Accounts payable Accounts receivable $ 42,200 Additional paid-in capital 50,000 214,000 Buildings (net) (4-year remaining life) Cash and short-term investments 82,250 Common stock 250,000 Equipment (net) (5-year remaining life) 375,000 Inventory 90,500 Land 117,000 Long-term liabilities (mature 12/31/23) Retained earnings, 1/1/20 170,000 409,650 Supplies 16,000 Totals $936,950 $936,950 During 2020, Abernethy reported net income of $117,500 while declaring and paying dividends of $15,000. During 2021, Abernethy reported net income of $171,250 while declaring and paying dividends of $55.000. Assume that Chapman Company acquired Abernethy's common stock for $816,280 in cash. Assume that the equipment and long-term liabilities had fair values of $396,950 and $140,720, 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.)
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 Credit $ 57,300 Accounts payable Accounts receivable $ 42,200 Additional paid-in capital 50,000 214,000 Buildings (net) (4-year remaining life) Cash and short-term investments 82,250 Common stock 250,000 Equipment (net) (5-year remaining life) 375,000 Inventory 90,500 Land 117,000 Long-term liabilities (mature 12/31/23) Retained earnings, 1/1/20 170,000 409,650 Supplies 16,000 Totals $936,950 $936,950 During 2020, Abernethy reported net income of $117,500 while declaring and paying dividends of $15,000. During 2021, Abernethy reported net income of $171,250 while declaring and paying dividends of $55.000. Assume that Chapman Company acquired Abernethy's common stock for $816,280 in cash. Assume that the equipment and long-term liabilities had fair values of $396,950 and $140,720, 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.)
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 26E
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Transcribed Image Text: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
Credit
$ 57,300
Accounts payable
Accounts receivable
$ 42,200
Additional paid-in capital
50,000
214,000
Buildings (net) (4-year remaining life)
Cash and short-term investments
Common stock
82,250
250,000
Equipment (net) (5-year remaining Life)
375,000
Inventory
90,500
Land
117,000
170,000
Long-term liabilities (mature 12/31/23)
Retained earnings, 1/1/20
409,650
Supplies
16,000
Totals
$936,950 $ 936,950
During 2020, Abernethy reported net income of $117,500 while declaring and paying dividends of $15,000. During 2021, Abernethy
reported net income of $171,250 while declaring and paying dividends of $55,000.
Assume that Chapman Company acquired Abernethy's common stock for $816,280 in cash. Assume that the equipment and long-term
liabilities had fair values of $396,950 and $140,720, 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.)
view transaction list
Consolidation
Worksheet Entries
1
5
7
8
Prepare entry 5 to eliminate stockholders' equity accounts of subsidiary.
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