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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) Common stock Debit Credit $ 50,000 $ 40,000 50,000 120,000 Cash and short-term investments 60,000 250,000 Equipment (net) (5-year remaining life) 200,000 Inventory 90,000 Land 80,000 Long-term liabilities (mature 12/31/23) Retained earnings, 1/1/20 150,000 100,000 Supplies Totals 10,000 $600,000 $ 600,000

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) Common stock Debit Credit $ 50,000 $ 40,000 50,000 120,000 Cash and short-term investments 60,000 250,000 Equipment (net) (5-year remaining life) 200,000 Inventory 90,000 Land 80,000 Long-term liabilities (mature 12/31/23) Retained earnings, 1/1/20 150,000 100,000 Supplies Totals 10,000 $600,000 $ 600,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 Accounts receivable Accounts payable Additional paid-in capital Buildings (net) (4-year remaining life) Credit $ 50,000 $ 40,000 50,000 120,000 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 Totals 10,000 $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 $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.)
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: Debit Accounts receivable Accounts payable Additional paid-in capital Buildings (net) (4-year remaining life) Credit $ 50,000 $ 40,000 50,000 120,000 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 Totals 10,000 $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 $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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