chapman Company obtains 100 percent of Abernethy Company’s stockon January 1, 2017. As of that date, Abernethy has the followingtrial 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 |
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During 2017, Abernethy reported net income of $99,000 whiledeclaring and paying dividends of $12,000. During 2018, Abernethyreported net income of $151,250 while declaring and payingdividends of $53,000.
Assume that Chapman Company acquired Abernethy’s common stockfor $855,330 in cash. Assume that the equipment and long-termliabilities had fair values of $464,600 and $134,620, respectively,on the acquisition date. Chapman uses the initial value method toaccount for its investment.
Prepare consolidation worksheet entries for December 31, 2017,and December 31, 2018. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field.)
a) Prepare entry S to eliminate stockholders' equity accounts ofsubsidiary
(b) Prepare entry A to recognize allocations determined above inconnection with acquisition date fair values
(c) prepare entry I to eliminate intra-entity dividend declarationsrecorded by parent as income
(d) Prepare entry E to recognize current year amortizationexpense
e) prepare entry C* to convert parent company figures to equitymethod by recognizing subsidiary increase in book value for prioryear (99,000 net income less 12,000 dividend declaration) andexcess amortizations for that period 12,390)
(f) Prepare entry S to eliminate beginning stockholders' equity ofsubsidiary - the retained earnings account has been adjusted for2017 income and dividends. Entry *C is not needed because equitymethod was applied.
(g) Prepare entry A to recognize allocations relating to investment- balances shown here are as of beginning current year (originalallocation less excess amortizations for the prior period).
(h) Prepare entry I to eliminate intra-entity dividend declarationsby parent as income
(i) Prepare entry E to recognize 2018 amortization expenses
(j) Prepare entry E to recognize current year amortizationexpense
