Questions:
1. Prepare entry S to eliminate stockholders' equity accounts of subsidiary.
2. Prepare entry A to recognize allocations attributed to fair value of specific accounts at acquisition date with residual fair value recognized as goodwill.
3. Prepare entry I to eliminate $122,500 income accrual for 2017 less $11,000 amortization recorded by parent using equity method.
4. Prepare entry D to eliminate intra-entity dividend transfers.
5. Prepare entry E to recognize current year amortization expense.
6. Prepare entry S to eliminate beginning stockholders' equity of subsidiary—the Retained Earnings account has been adjusted for 2017 income and dividends. Entry *C is not needed because equity method was applied.
7. Prepare entry A to recognize allocations relating to investment—balances shown here are as of beginning of current year [original allocation less excess amortizations for the prior period].
8. Prepare entry I to eliminate $159,250 income accrual less $11,000 amortization recorded by parent during 2018 using equity method.
9. Prepare entry D to eliminate intra-entity dividend transfers.
10. Prepare entry E to recognize current year amortization expense.
Consolidation Entries for two years using Initial value Method | ||
Consolidation Entries as of December 31, 2017 | ||
1) Entry S | Debit | Credit |
Common Stock—Abernethy | $250,000 | |
Additional Paid-in Capital | $50,000 | |
Retained Earnings—1/1/17 | $268,750 | |
Investment in Abernethy | $568,750 | |
(To eliminate stockholders' equity accounts of subsidiary) | ||
Purchase price allocation and annual excess fair value amortizations | ||
Acquisition date value (consideration paid) | $698,050 | |
Book value | $568,750 | |
Excess price paid over book value (Goodwill) | $129,300 | |
Life assigned to goodwill | indifinetly | |
Annual excess amortizations | $0.00 | |
2) Entry A | ||
Goodwill | $129,300 | |
Investment in Abernethy | $129,300 | |
(To recognize goodwill portion of the original acquisition fair value) | ||
3) Entry I | ||
Equity in Earnings of Subsidiary | $122,500.00 | |
Investment in Abernethy | $122,500.00 | |
(To eliminate intercompany income accrual for the current year based on the parent's usage of the partial equity method) | ||
4) Entry D | ||
Investment in Abernethy | $15,000.00 | |
Dividends Paid | $15,000.00 | |
(To eliminate intercompany dividend transfers) | ||
5) Entry E—Not needed. Goodwill is not amortized | No Journal Entry | |
Consolidation Entries as of December 31, 2018 | ||
6) | ||
Entry S | ||
Common Stock—Abernethy | $250,000 | |
Additional Paid-in Capital | $50,000 | |
Retained Earnings—1/1/18 ($268750+$122500 -15000) | $376,250 | |
Investment in Abernethy | $676,250 | |
(To eliminate stockholders' equity accounts of subsidiary) | ||
7) | ||
Entry A | ||
Goodwill | $129,300 | |
Investment in Abernethy | $129,300 | |
(To recognize goodwill portion of the original acquisition fair value) | ||
8) | ||
Entry I | ||
Equity in Earnings of Subsidiary | $159,250.00 | |
Investment in Abernethy | $159,250.00 | |
(To eliminate intercompany income accrual for the current year based on the parent's usage of the partial equity method) | ||
9) | ||
Investment in Abernethy | $49,000.00 | |
Dividends Paid | $49,000.00 | |
(To eliminate intercompany dividend transfers) | ||
10) Entry E—Not needed. Goodwill is not amortized | ||
No Journal Entry |
Questions: 1. Prepare entry S to eliminate stockholders' equity accounts of subsidiary. 2. Prepare entry A...
1 Prepare entry S to eliminate stockholders' equity accounts of subsidiary. 2 Prepare entry A to recognize goodwill portion of the original acquisition fair value. 3 Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method. 4 Prepare entry D to eliminate intra-entity dividend transfers. 5 Prepare entry E. 6 Prepare entry *C. 7 Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary—the retained...
1. Prepare entry S to eliminate stockholders' equity accounts of subsidiary. 2. Prepare entry A to recognize goodwill portion of the original acquisition fair value. 3. Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method. 4. Prepare entry D to eliminate intra-entity dividend transfers. 5. Prepare entry E. 6. Prepare entry *C. 7. Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary—the retained...
Prepare entry S to eliminate stockholders' equity accounts of subsidiary. 2 Prepare entry A to recognize allocations determined above in connection with acquisition-date fair values. 3 Prepare entry I to eliminate intra-entity dividend declarations recorded by parent as income. 4 Prepare entry E to recognize 2017 amortization expense. 5 Prepare entry *C to convert parent company figures to equity method by recognizing subsidiary's increase in book value for prior year [$117,500 net income less $15,000 dividend declaration] and excess amortizations...
Tasks: Prepare entry A to recognize goodwill portion of the original acquisition fair value. Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method Prepare entry D to eliminate intra-entity dividend transfers Prepare entry E Prepare entry *C. Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary—the retained earnings balance has been adjusted for 2017 income and dividends Prepare entry A to recognize original...
Tasks: Prepare entry A to recognize allocations determined above in connection with acquisition-date fair values. Prepare entry I to eliminate intra-entity dividend declarations recorded by parent as income. Prepare entry E to recognize 2017 amortization expense. Prepare entry *C to convert parent company figures to equity method by recognizing subsidiary's increase in book value for prior year [$104,500 net income less $13,000 dividend declaration] and excess amortizations for that period [$11,800]. Prepare entry A to recognize allocations relating to investment—balances...
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 $ 58,900 Accounts receivable $ 41,500 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 211,000 Cash and short-term investments 70,750 Common stock 250,000 Equipment (net) (5-year remaining life) 430,000 Inventory 139,000 Land 121,500 Long-term liabilities (mature 12/31/20) 174,000 Retained earnings, 1/1/17 498,450 Supplies 17,600 Totals $ 1,031,350 $ 1,031,350 During 2017, Abernethy...
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 $ 51,500 $ 46,500 50,000 190,000 67,750 Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies Totals 250,000 442,500 107,000 93,500 166,500 448,250 19,000 $966,250 $966,250 During 2017, Abernethy reported net...
Problem 3-20 (LO 3-3b) 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 $ 52,800 Accounts receivable $ 49,500 Additional paid in capital 50,000 Buildings (net) (4-year remaining life) 174,000 Cash and short-term investments 84,000 Common stock 250,000 Equipment (net) (5.year remaining life) 315,000 Inventory 137,500 Land 90,500 Long-term liabilities (mature 12/31/20) 188,500 Retained earnings, 1/1/17 323,600 Supplies 14,400 Totals $864,900 $...
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 $ 52,400 Accounts receivable $ 48,600 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 179,000 Cash and short-term investments 61,250 Common stock 250,000 Equipment (net) (5-year remaining life) 260,000 Inventory 121,500 Land 105,000 Long-term liabilities (mature 12/31/20) 174,500 Retained earnings, 1/1/17 264,650 Supplies 16,200 Totals $ 791,550 $ 791,550 During 2017, Abernethy...
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 $ 52,400 Accounts receivable $ 48,600 Additional paid-in capital 50,000 Buildings (net) (4-year remaining life) 179,000 Cash and short-term investments 61,250 Common stock 250,000 Equipment (net) (5-year remaining life) 260,000 Inventory 121,500 Land 105,000 Long-term liabilities (mature 12/31/20) 174,500 Retained earnings, 1/1/17 264,650 Supplies 16,200 Totals $ 791,550 $ 791,550 During 2017, Abernethy...