Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1,2012. As of that date, Abernethy has the following trial balance:
| Debit | Credit |
Accounts payable |
| $ 50,000 |
Accounts receivable | $ 40,000 |
|
Additional paid-in capital |
| 50,000 |
Buildings (net) (4-year life) | 120,000 |
|
Cash and short-term investments | 60,000 |
|
Common stock |
| 250,000 |
Equipment (net) (5-year life) | 200,000 |
|
Inventory | 90,000 |
|
Land | 80,000 |
|
Long-term liabilities (mature 12/31/15) |
| 150,000 |
Retained earnings, 1/1/12 |
| 100,000 |
Supplies |
| 10,000 |
Totals | $ 600,000 | $ 600,000 |
During 2012, Abernethy reported income of $80,000 while paying dividends of $10,000. During 2013, Abernethy reported income of $110,000 while paying dividends of $30,000.
Assume that Chapman Company acquired Abernethy’s common stock for $490,000 in cash. As of January 1,2012, Abernethy’s land had a fair value of $90,000, its buildings were valued at $160,000, and its equipment was appraised at $180,000. Chapman uses the equity method for this investment. Prepare consolidation worksheet entries for December 31, 2012, and December 31,2013.
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