Reference no: EM132210492

Question 1. Willkom Corporation bought 100 percent of Szabo, Inc., on January 1, 2010. On that date, Willkom's equipment (10-year life) has a book value of $300,000 but a fair value of $400,000. Szabo has equipment (10-year life) with a book value of $200,000 but a fair value of $300,000. Willkom uses the equity method to record its investment in Szabo. On December 31, 2012, Willkom has equipment with a book value of $210,000 but a fair value of $330,000. Szabo has equipment with a book value of $140,000 but a fair value of $270,000. What is the consolidated balance for the Equipment account as of December 31, 2012?

Problems 2 through 4 should be viewed as independent situations. They are based on the following data: Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2011. As of that date, Abernethy has the following trial balance:

Debit Credit Accounts payable...... St OPEN ORNN TEMES OAT) ee ERO We reerennae ident SOLIOE Accounts receivable... 6... eee eee eee cece cece cece, $ 40,000 Additional paid-in capital................... CRM ft denne eg: 9 waien sr aaseenes ss OOOO Buildings (net) (4-year life)... 0... cece cece cece. 120,000 Cash and short-term investments............................ 60,000 SIMON yee vee asa riuinny situa s2y sy snmnsassneinwss symm et cene Equipment (net) (5-year life)... 2.0... ce eee e eee. *.. 200,000 EPO const hdesany pouennkesusuenss sus guns sLEseeene Fh 90,000 DANG ksi cece cesar seadsccneugecnabetseseccccc, 80,000 Long-term liabilities (mature 12/31/14)......., ‘ tee e wees aatneesereveneevesed 30,000 Revzined earnings, 1/1/11............. Onna eee eee eee eens seveserseseeseseesee1 00,000 OR is ts meesudsswomeumts nanwdansvuewlenesumueme, 10,000 TOMB. onus wend ss eyuumansnendun ty rauniasenatenc. $600,000 $600,090
During 2011, Abernethy reported income of $80,000 while paying dividends of $10,000. During 2012, Abernethy reported income of $1 10,000 while paying dividends of $30,000.

Question 2. Assume that Chapman Company acquired Abernethy's common stock for $490,000 in cash. As of January 1, 2011, Abernethy's land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $1 80,000. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2011, and December 3 1, 2012.

Question 3. Assume that Chapman Company acquired Abernethy's common stock for $500,000 in cash. Assume that the equipment and long-term liabilities had fair values of $220,000 and $120,000, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment. Prepare consolidation worksheet entries for December 31, 2011, and December 3 1, 2012.