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Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that...

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Accounting

Chapman Company obtains 100 percent of Abernethy Company’s stockon January 1, 2017. As of that date, Abernethy has the followingtrial balance:

DebitCredit
Accounts payable$57,700
Accounts receivable$45,000
Additional paid-in capital50,000
Buildings (net) (4-yearremaining life)124,000
Cash and short-terminvestments68,250
Common stock250,000
Equipment (net) (5-yearremaining life)327,500
Inventory103,000
Land106,000
Long-term liabilities (mature12/31/20)183,500
Retained earnings, 1/1/17252,350
Supplies19,800
Totals$793,550$793,550

During 2017, Abernethy reported net income of $101,000 whiledeclaring and paying dividends of $13,000. During 2018, Abernethyreported net income of $152,000 while declaring and payingdividends of $39,000.

Assume that Chapman Company acquired Abernethy’s common stockfor $696,650 in cash. As of January 1, 2017, Abernethy’s land had afair value of $124,300, its buildings were valued at $200,000, andits equipment was appraised at $305,750. Chapman uses the equitymethod for this investment.

Prepare consolidation worksheet entries for December 31, 2017,and December 31, 2018. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field.)

Answer & Explanation Solved by verified expert
4.4 Ratings (1138 Votes)

Date general journal debit credit
December 31, 2017
Entry S

Common
Stock—Abernethy

 250000
Additional
Paid-in Capital—Abernethy		 50000
Retained
Earnings—1/1/17		 252350
Investment
in Abernethy		 552350
Entry A land (124300-106000) 18300
Building (200000-124000) 76000
Goodwill (balancing figure) 71750
Equipment (327500-305750) 21750
Investment
in Abernethy (696650-552350)		 144300
Entry I Equity
in Earnings of Subsidiary		 86350
Investment
in Abernethy (101000- 14650)		 86350
Entry D Investment
in Abernethy		 13000
Dividend
Paid		 13000
Entry E depreciation expense 14650
Equipment (21750/5) 4350
Buildings (76000/4) 19000
December 31, 2018.
Entry S common stock - Abernathy 250000
Additional
Paid-in Capital—Abernethy		 50000
Retained
Earnings—1/1/18 (252350+101000-13000)		 340350
Investment
in Abernethy		 640650
Entry A land 18300
Buildings (76000-19000) 57000
Goodwill 71750
Equipment (21750-4350) 17400
Investment
in Abernethy (144300-14650)		 129650
Entry I Equity
in Earnings of Subsidiary		 137350
Investment
in Abernethy (152000-14650)		 137350
Entry D Investment
in Abernethy		 39000
Dividend paid 39000
Entry E depreciation expense 14650
Equipment 4350
Buildings 19000

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