50.1K

Verified Solution

Link Copied!

Chapman Company obtains 100 percent of Abernethy Company's stock on January 1,2020 . As of that date, Abernethy has the following trial balance: During 2020, Abernethy reported net income of $99,000 while declaring and paying dividends of $12,000. During 2021 , Abernethy reported net income of $151,250 while declaring and paying dividends of $53,000. Assume that Chapman Company acquired Abernethy's common stock for $866,800 in cash. As of January 1, 2020, Abernethy's land had a fair value of $110,900, its buildings were valued at $232,400, and its equipment was appraised at $418,250. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1 Prepare entry C to convert parent's beginning retained earnings to full accrual basis. 2 Prepare entry S to eliminate stockholders' equity accounts of subsidiary. 3 Prepare entry A to recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as goodwill. 4 Prepare entry I to eliminate the income accrual for 2020 less the amortization recorded by the parent using the equity method. 5 Prepare entry D to eliminate intra-entity dividend transfers. 6 Prepare entry E to recognize current year amortization expense. 7 Prepare entry C to convert parent's beginning retained earnings to full accrual basis. 8 Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2021. 9 Prepare entry A to recognize allocations attributed to specific accounts at acquisition date for 2021. 10 Prepare entry I to eliminate the income accrual for 2021 less the amortization recorded by the parent using the equity method. 11 Prepare entry D to eliminate intra-entity dividend transfers. Prepare entry E to recognize current year amortization expense

Answer & Explanation Solved by verified expert

See Answer