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 $ 40,400 128,000 68,750 407,500 119,000 82,000 15,600 $861,250 Credit $ 50,900 50,000 250,000 171,500 338,850 $ 861,250 During 2020, Abernethy reported net income of $124,000 while declaring and paying dividends of $16,000. During 2021, Abernethy reported net income of $164,750 while declaring and paying dividends of $60,000. Assume that Chapman Company acquired Abernethy's common tock for $745,990 in cash. Assume that the equipment and long- term liabilities had fair values of $431,600 and $140,860, 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 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 $ 40,400 128,000 68,750 407,500 119,000 82,000 15,600 $861,250 Credit $ 50,900 50,000 250,000 171,500 338,850 $ 861,250 During 2020, Abernethy reported net income of $124,000 while declaring and paying dividends of $16,000. During 2021, Abernethy reported net income of $164,750 while declaring and paying dividends of $60,000. Assume that Chapman Company acquired Abernethy's common tock for $745,990 in cash. Assume that the equipment and long- term liabilities had fair values of $431,600 and $140,860, 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.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Prepare consoldiation worksheet entries for December 31, 2020 and December 31, 2021.
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
$ 40,400
128,000
68,750
407,500
119,000
82,000
15,600
$861,250
Credit
$ 50,900
50,000
250,000
171,500
338,850
$ 861,250
During 2020, Abernethy reported net income of $124,000 while declaring and paying dividends of $16,000. During 2021, Abernethy
reported net income of $164,750 while declaring and paying dividends of $60,000.
Assume that Chapman Company acquired Abernethy's common stock for $745,990 in cash. Assume that the equipment and long-
term liabilities had fair values of $431,600 and $140,860, 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.)
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