Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/23) Retained earnings, 1/1/20 Supplies Totals Debit $ $ 40,000 120,000 60,000 200,000 90,000 80,000 10,000 600,000 Credit $ 50,000 50,000 250,000 150,000 100,000 $ 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 $490,000 in cash. As of January 1, 2020, Abernethy's land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $180,000. 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.)
Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2020. As of that date, Abernethy has the following trial balance: Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/23) Retained earnings, 1/1/20 Supplies Totals Debit $ $ 40,000 120,000 60,000 200,000 90,000 80,000 10,000 600,000 Credit $ 50,000 50,000 250,000 150,000 100,000 $ 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 $490,000 in cash. As of January 1, 2020, Abernethy's land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $180,000. 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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:
Accounts payable
Accounts receivable
Additional paid-in capital
Buildings (net) (4-year remaining
life)
Cash and short-term investments
Common stock
Equipment (net) (5-year remaining
life)
Inventory
Land
Long-term liabilities (mature
12/31/23)
Retained earnings, 1/1/20
Supplies
Totals
Debit
$
$
40,000
120,000
60,000
200,000
90,000
80,000
10,000
600,000
Credit
$ 50,000
50,000
250,000
150,000
100,000
$ 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 $490,000 in cash. As of January 1, 2020,
Abernethy's land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at
$180,000. 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.)
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