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 Accounts payable $ 53,700 Accounts receivable $ 41,000 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 184,000 Cash and short-term investments 77,250 Common stock 250,000 Equipment (net) (5-year remaining life) 400,000 Inventory 117,500 Land 107,500 Long-term liabilities (mature 12/31/23) 173,000 Retained earnings, 1/1/20 417,450 Supplies 16,900 Totals $ 944,150 $ 944,150 During 2020, Abernethy reported net income of $98,000 while declaring and paying dividends of $12,000. During 2021, Abernethy reported net income of $128,250 while declaring and paying dividends of $39,000. Assume that Chapman Company acquired Abernethy’s common stock for $851,300 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $124,200, its buildings were valued at $254,400, and its equipment was appraised at $378,500. 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.) Prepare entry *C to convert parent's beginning retained earnings to full accrual basis. Prepare entry S to eliminate stockholders' equity accounts of subsidiary. prepare entry A to recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as goodwill. Prepare entry I to eliminate the income accrual for 2020 less the amortization recorded by the parent using the equity method. Prepare entry D to eliminate intra-entity dividend transfers. Prepare entry E to recognize current year amortization expense. Prepare entry *C to convert parent's beginning retained earnings to full accrual basis. Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2021. Prepare entry A to recognize allocations attributed to specific accounts at acquisition date for 2021. Prepare entry I to eliminate the income accrual for 2021 less the amortization recorded by the parent using the equity method. Prepare entry D to eliminate intra-entity dividend transfers. Prepare entry E to recognize current year amortization expense.
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following
| Debit | Credit | ||||
| Accounts payable | $ | 53,700 | |||
| $ | 41,000 | ||||
| Additional paid-in capital | 50,000 | ||||
| Buildings (net) (4-year remaining life) | 184,000 | ||||
| Cash and short-term investments | 77,250 | ||||
| Common stock | 250,000 | ||||
| Equipment (net) (5-year remaining life) | 400,000 | ||||
| Inventory | 117,500 | ||||
| Land | 107,500 | ||||
| Long-term liabilities (mature 12/31/23) | 173,000 | ||||
| 417,450 | |||||
| Supplies | 16,900 | ||||
| Totals | $ | 944,150 | $ | 944,150 | |
During 2020, Abernethy reported net income of $98,000 while declaring and paying dividends of $12,000. During 2021, Abernethy reported net income of $128,250 while declaring and paying dividends of $39,000.
Assume that Chapman Company acquired Abernethy’s common stock for $851,300 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $124,200, its buildings were valued at $254,400, and its equipment was appraised at $378,500. 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
Prepare entry *C to convert parent's beginning retained earnings to full accrual basis.
Prepare entry S to eliminate
prepare entry A to recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as
Prepare entry I to eliminate the income accrual for 2020 less the amortization recorded by the parent using the equity method.
Prepare entry D to eliminate intra-entity dividend transfers.
Prepare entry E to recognize current year amortization expense.
Prepare entry *C to convert parent's beginning retained earnings to full accrual basis.
Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2021.
Prepare entry A to recognize allocations attributed to specific accounts at acquisition date for 2021.
Prepare entry I to eliminate the income accrual for 2021 less the amortization recorded by the parent using the equity method.
Prepare entry D to eliminate intra-entity dividend transfers.
Prepare entry E to recognize current year amortization expense.
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