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 $ 52,400 Accounts receivable $ 48,600 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 179,000 Cash and short-term investments 61,250 Common stock 250,000 Equipment (net) (5-year remaining life) 260,000 Inventory 121,500 Land 105,000 Long-term liabilities (mature 12/31/20) 174,500 Retained earnings, 1/1/17 264,650 Supplies 16,200 Totals $ 791,550 $ 791,550 During 2017, Abernethy reported net income of $86,000 while declaring and paying dividends of $11,000. During 2018, Abernethy reported net income of $124,500 while declaring and paying dividends of $47,000. Assume that Chapman Company acquired Abernethy’s common stock for $675,160 in cash. Assume that the equipment and long-term liabilities had fair values of $284,350 and $142,140, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment. Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018.
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following
Debit | Credit | ||||
Accounts payable | $ | 52,400 | |||
$ | 48,600 | ||||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 179,000 | ||||
Cash and short-term investments | 61,250 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 260,000 | ||||
Inventory | 121,500 | ||||
Land | 105,000 | ||||
Long-term liabilities (mature 12/31/20) | 174,500 | ||||
264,650 | |||||
Supplies | 16,200 | ||||
Totals | $ | 791,550 | $ | 791,550 | |
During 2017, Abernethy reported net income of $86,000 while declaring and paying dividends of $11,000. During 2018, Abernethy reported net income of $124,500 while declaring and paying dividends of $47,000.
Assume that Chapman Company acquired Abernethy’s common stock for $675,160 in cash. Assume that the equipment and long-term liabilities had fair values of $284,350 and $142,140, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.
Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018.
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