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Question 2<br/><br/><br/>Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2017

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Question 2<br/><br/><br/>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 CreditAccounts payable   $58,900Accounts receivable$41,500   Additional paid-in capital    50,000Buildings (net) (4-year remaining life) 211,000   Cash and short-term investments 70,750   Common stock    250,000Equipment (net) (5-year remaining life) 430,000   Inventory 139,000   Land 121,500   Long-term liabilities (mature 12/31/20)    174,000Retained earnings, 1/1/17    498,450Supplies 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 by paying $922,450 in cash. All of Abernethy's accounts are estimated to have a fair value approximately equal to present book values. Chapman uses the partial equity method to account for its investment.
 
Prepare the 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.)
 


1December 31, 2017Common stock - Abernethyselected answer correct
250,000selected answer correct
not attempted
Additional paid-in capitalselected answer correct
50,000selected answer correct
not attempted
Retained earnings - 1/1/17selected answer correct
498,450selected answer correct
not attempted
Investment in Abernethyselected answer correct
not attempted
798,450selected answer correct
2December 31, 2017Goodwillselected answer correct
11,500selected answer incorrect
not attempted
Equipmentselected answer incorrect
66,000selected answer incorrect
not attempted
Long-term liabilitiesselected answer incorrect
62,750selected answer incorrect
not attempted
Investment in Abernethyselected answer incorrect
not attempted
36,500selected answer incorrect
not attempted
not attempted
103,750selected answer incorrect
3December 31, 2017No journal entry requiredselected answer incorrect
15,000selected answer incorrect
not attempted
Dividends declaredselected answer incorrect
not attempted
15,000selected answer incorrect
11December 31, 2018Depreciation expenseselected answer incorrect
9,200selected answer incorrect
not attempted
Equipmentselected answer incorrect
7,300selected answer incorrect
not attempted
Buildings