See the attached file for the full problem: I need explanation only in number 17.
17. Assume that Chapman Company acquired Abernethy's common stock for $490,000 in cash. As of
January 1,2009, 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 31,2009, and December 31,2010.
Problems 17 through 19 should be viewed as independent situations. They are based on the following data:
Chapman Company obtains 100 percent of Abernethy Company's stock on January 1, 2009. As of that date, Abernethy has the following trial balance:
Additional paid-in capital
Buildings (net) (4-year life)
Cash and short-term investments ....
Equipment (net) (5-year life)
Long-term liabilities (mature 12/31/12)
Retained earnings, 1/1/09
200,000 90,000 80,000
During 2009, Abernethy reported income of $80,000 while paying dividends of $ 10,000. During 2010, Abernethy reported income of $110,000 while paying dividends of $30,000.
17. Assume that Chapman Company acquired Abernethy's common stock for $490,000 in cash. As of January 1,2009, Abernethy's land had a fair value of $90,000, its ...
The solution explains the consolidation entries.