Prepare consolidation entries
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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.
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Solution Summary
The solution explains the consolidation entries.
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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:
Accounts payable
Accounts receivable
Additional paid-in capital
Buildings (net) (4-year life)
Cash and short-term investments ....
Common stock
Equipment (net) (5-year life)
Inventory
Land
Long-term liabilities (mature 12/31/12)
Retained earnings, 1/1/09
Supplies
Totals
Debit
$ 40,000
120,000 60,000
200,000 90,000 80,000
10.000 $600,000
Credit
$ 50,000
50,000 250,000
150,000 100,000
$600,000
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 ...
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