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 $ 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 12/31/23) 174,500 Retained earnings, 1/1/20 264,650 Supplies 16,200 Totals $ 791,550 $ 791,550 During 2020, Abernethy reported net income of $86,000 while declaring and paying dividends of $11,000. During 2021, Abernethy reported net income of $124,500 while declaring and paying dividends of $47,000. Assume that Chapman Company acquired Abernethy’s common stock by paying $752,650 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment. Prepare the 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 S to eliminate stockholders' equity accounts of subsidiary. Prepare entry A to recognize goodwill portion of the original acquisition fair value. Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method.
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 | $ | 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 12/31/23) | 174,500 | ||||
| Retained earnings, 1/1/20 | 264,650 | ||||
| Supplies | 16,200 | ||||
| Totals | $ | 791,550 | $ | 791,550 | |
During 2020, Abernethy reported net income of $86,000 while declaring and paying dividends of $11,000. During 2021, Abernethy reported net income of $124,500 while declaring and paying dividends of $47,000.
Assume that Chapman Company acquired Abernethy’s common stock by paying $752,650 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment.
Prepare the consolidation worksheet entries for December 31, 2020, and December 31, 2021. (If no entry is required for a transaction/event, select "No
Prepare entry S to eliminate
Prepare entry A to recognize
Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method.
Prepare entry D to eliminate intra-entity dividend transfers.
Prepare entry E to recognize 2020 amortization expense.
Prepare entry *C to convert parent company figures to equity method.
Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2021.
Prepare entry A to recognize original goodwill balance.
Prepare entry I to eliminate Intra-entity Income accrual for the current year.
Prepare entry D to eliminate Intra-entity dividend transfers.
Prepare entry E to recognize 2021 amortization expense.
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