Question

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2017. As of that...

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 $ 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

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.

Assume that Chapman Company acquired Abernethy’s common stock for $877,650 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $116,200, its buildings were valued at $285,600, and its equipment was appraised at $391,750. Chapman uses the equity method for this investment.

Prepare consolidation worksheet entries for December 31, 2017, and December 31, 2018.

Please show calculations, thanks.

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