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 $ 50,000 Accounts receivable $ 40,000 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 120,000 Cash and short-term investments 60,000 Common stock 250,000 Equipment (net) (5-year remaining life) 200,000 Inventory 90,000 Land 80,000 Long-term liabilities (mature 12/31/23) 150,000 Retained earnings, 1/1/20 100,000 Supplies 10,000 Totals $ 600,000 $ 600,000 During 2020, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2021, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000. Assume that Chapman Company acquired Abernethy’s common stock for $500,000 in cash. Assume that the equipment and long-term liabilities had fair values of $220,000 and $120,000, 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
Debit | Credit | ||||
Accounts payable | $ | 50,000 | |||
$ | 40,000 | ||||
Additional paid-in capital | 50,000 | ||||
Buildings (net) (4-year remaining life) | 120,000 | ||||
Cash and short-term investments | 60,000 | ||||
Common stock | 250,000 | ||||
Equipment (net) (5-year remaining life) | 200,000 | ||||
Inventory | 90,000 | ||||
Land | 80,000 | ||||
Long-term liabilities (mature 12/31/23) | 150,000 | ||||
100,000 | |||||
Supplies | 10,000 | ||||
Totals | $ | 600,000 | $ | 600,000 | |
During 2020, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2021, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000.
Assume that Chapman Company acquired Abernethy’s common stock for $500,000 in cash. Assume that the equipment and long-term liabilities had fair values of $220,000 and $120,000, 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
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