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 $ 51,500
Accounts receivable $ 46,500
Additional paid-in capital 50,000
Buildings (net) (4-year remaining life) 190,000
Cash and short-term investments 67,750
Common stock 250,000
Equipment (net) (5-year remaining life) 442,500
Inventory 107,000
Land 93,500
Long-term liabilities (mature 12/31/20) 166,500
Retained earnings, 1/1/17 448,250
Supplies 19,000
Totals $ 966,250 $ 966,250

During 2017, Abernethy reported net income of $99,000 while declaring and paying dividends of $12,000. During 2018, Abernethy reported net income of $151,250 while declaring and paying dividends of $53,000.

Assume that Chapman Company acquired Abernethy’s common stock by paying $947,250 in cash. All of Abernethy’s accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment.

Prepare the 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.)

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