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Question: chapman company obtains 100 percent of abernethy companys stock on...

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Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. 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 12/31/20) 174,500
Retained earnings, 1/1/17 264,650
Supplies 16,200
Totals $ 791,550 $ 791,550

During 2017, Abernethy reported net income of $86,000 while declaring and paying dividends of $11,000. During 2018, 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, 2017, and December 31, 2018.

Journal entry #1- Prepare entry S to eliminate stockholders' equity accounts of subsidiary.

Journal entry #2- Prepare entry A to recognize goodwill portion of the original acquisition fair value.

Journal entry #3- Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method.

Journal entry #4- Prepare entry D to eliminate intra-entity dividend transfers.

Journal entry #5- Prepare entry E.

Journal entry #6- Prepare entry *C.

Journal entry #7- Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary—the retained earnings balance has been adjusted for 2017 income and dividends.

Journal entry #8- Prepare entry A to recognize original goodwill balance.

Journal entry #9- Prepare entry I to eliminate Intra-entity Income accrual for the current year.

Journal entry #10- Prepare entry D to eliminate Intra-entity dividend transfers.

Journal entry #11- Prepare entry E. (I'm certain this is a no entry required)

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