Question: chapman company obtains 100 percent of abernethy companys stock on...
Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that date, Abernethy has the following trial balance:
|Additional paid-in capital||50,000|
|Buildings (net) (4-year remaining life)||128,000|
|Cash and short-term investments||68,750|
|Equipment (net) (5-year remaining life)||407,500|
|Long-term liabilities (mature 12/31/20)||171,500|
|Retained earnings, 1/1/17||338,850|
During 2017, Abernethy reported net income of $124,000 while declaring and paying dividends of $16,000. During 2018, 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 $756,500 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $93,100, its buildings were valued at $194,800, and its equipment was appraised at $366,250. Chapman uses the equity method for this investment.
Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018