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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 $ 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 reported net income of $120,000 while declaring and paying dividends of $15,000. During 2018, Abernethy reported net income of $170,000 while declaring and paying dividends of $48,000.

Assume that Chapman Company acquired Abernethy’s common stock for $902,200 in cash. As of January 1, 2017, Abernethy’s land had a fair value of $133,000, its buildings were valued at $277,000, and its equipment was appraised at $393,500. Chapman uses the equity method for this investment.

Prepare 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.)

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 $120,000 income accrual for 2017 less $9,200 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 $170,000 income accrual less $9,200 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.

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