Question

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2014. As of that date, Abernethy has the following trial balance:

	Debit			Credit
Accounts payable				$	56,700
Accounts receivable	$	43,800
Additional paid-in capital					50,000
Buildings (net) (4-year life)		143,000
Cash and short-term investments		80,250
Common stock					250,000
Equipment (net) (5-year life)		295,000
Inventory		110,500
Land		112,000
Long-term liabilities (mature 12/31/17)					171,000
Retained earnings, 1/1/14					268,750
Supplies		11,900
Totals	$	796,450		$	796,450

     During 2014, Abernethy reported net income of $122,500 while declaring and paying dividends of $15,000. During 2015, Abernethy reported net income of $159,250 while declaring and paying dividends of $49,000.

Assume that Chapman Company acquired Abernethy’s common stock for $698,050 in cash. As of January 1, 2014, Abernethy’s land had a fair value of $123,900, its buildings were valued at $219,400, and its equipment was appraised at $254,500. Chapman uses the equity method for this investment.

Prepare consolidation worksheet entries for December 31, 2014, and December 31, 2015.

Answer 1

Consolidated worksheet entries:

Date	General journal	Debit($)	Credit($)
Dec 31, 2014
a)	Common Stock-Abernethy	250,000
	Additional paid-in capital	50,000
	Retained earnings 1/1/14	268,750
	Investment in Abernethy		568,750
b)	Land (123900-112000)	11900
	Building(219,400-143000)	76400
	Goodwill
	Equipment(295000-254500)		40500
	Investment in Abernethy
c)	Equity In Subsidiary earnings
	Investment in Abernethy
d)	Investment in Abernethy	15000
	Dividends paid		15000
e)	Depreciation Expense
	Equipment
	Buildings
Dec 31, 2015
a)	Common Stock-Abernethy	250,000
	Additional paid-in capital	50,000
	Retained earnings
	Investment in Abernethy
b)