Reference no: EM132463395

Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017. As of that date, Abernethy has the following trial balance:

Accounts payable                                             $58,300

Accounts receivable                            $43,500

Additional paid-in capital                                      50,000

Buildings (net) (4-year remaining life       210,000

Cash and short-term investments          83,250

Common stock                                                    250,000

Equipment (net) (5-year remaining life) 417,500

Inventory                                         95,000

Land                                              103,000

Long-term liabilities (mature 12/31/20)                      163,000

Retained earnings, 1/1/17                                        445,850

Supplies                                           14,900

Totals                                              $967,150           $967,150

Point 1: During 2017, Abernethy reported net income of $122,000 while declaring and paying dividends of $15,000. During 2018, Abernethy reported net income of $175,000 while declaring and paying dividends of $55,000.

Point 2: Assume that Chapman Company acquired Abernethy's common stock for $854,460 in cash. Assume that the equipment and long-term liabilities had fair values of $440,150 and $131,640, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.

Question 1: Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. December 31, 2017

Common stock - Abernethy             250,000

Additional paid-in capital                  50,000

Retained earnings - 1/1/17              445,850

Investment in Abernethy                                 745,850

2. December 31, 2017

Equipment                                   22,650

Long-term liabilities                   31,360

Goodwill                                       ?

Investment in Abernethy

                                                    ?

3. December 31, 2017

Dividend income                      15,000

Dividends declared

                                            15,000

4. December 31, 2017

Depreciation expense              4,530

Interest expense                   7,840

Equipment                              4,530

Long-term liabilities                  7,840

5. December 31, 2018

Investment in Abernethy            0

Retained earnings - 1/1/180

6. December 31, 2018

Common stock - Abernethy         250,000

Additional paid-in capital            50,000

Retained earnings - 1/1/18                  ?

Investment in Abernethy                      ?

7. December 31, 2018

Equipment                                     18,120

Long-term liabilities                        23,520

Goodwill                                             ?

Investment in Abernethy                       ?

8. December 31, 2018

Dividend income                             55,000

Dividends declared                          55,000

9. December 31, 2018

Depreciation expense                       4,530

Interest expense                             7,840

Equipment                                      4,530

Long-term liabilities                          7,840