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    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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    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 ...

    Solution Summary

    The solution explains the consolidation entries.

    $2.19

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