Question

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 Credit 50,900 $ $ 40,400 50,000 128,000 68,750 250,000 Accounts payable Accounts receivable Additional paid-in capital Buildings (net) (4-year remaining life) Cash and short-term investments Common stock Equipment (net) (5-year remaining life) Inventory Land Long-term liabilities (mature 12/31/20) Retained earnings, 1/1/17 Supplies Totals 407,500 119,000 82,000 171,500 338,850 15,600 $861,250 $ 861,250 During 2017, Abernethy reported net income of $124,000 while declaring and paying dividends of $16,000. During 2018, Abernethy reported net income of $164,750 while declaring and paying dividends of $60,000. Assume that Chapman Company acquired Abernethy's common stock by paying $802,850 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.)

• 1

  Prepare entry S to eliminate stockholders' equity accounts of subsidiary.

• 2

  Prepare entry A to recognize goodwill portion of the original acquisition fair value.

• 3

  Prepare entry I to eliminate intra-entity income accrual for the current year based on the parent's usage of the partial equity method.

• 4

  Prepare entry D to eliminate intra-entity dividend transfers.

• 5

  Prepare entry E.

• 6

  Prepare entry *C.

• 7

  Prepare entry S to eliminate beginning of year stockholders' equity accounts of subsidiary—the retained earnings balance has been adjusted for 2017 income and dividends.

• 8

  Prepare entry A to recognize original goodwill balance.

• 9

  Prepare entry I to eliminate Intra-entity Income accrual for the current year.

• 10

  Prepare entry D to eliminate Intra-entity dividend transfers.

• 11

  Prepare entry E.

Answer 1

No Journal entries in relates to " Amortization " of Goodwill ,,  

	Assume that Chapman Company Acquired Abernetty Common stock by
	paying $802850 In cash
	Chapman used Equiy method of accounting ( partial) to account for its Investment
	We need to pass couple of Journal Entries in case of Consolidation Report
1	Eliminate Stockholders Equity Account of Subsidiary
	Details		Debit($)	Credit($)
	additional paid up capital		50,000
	Common Stock		2,50,000
	Reatined Earnings		3,38,850
	Investement in Abernethy( Subsidiary)			6,38,850
	Book Value $	6,38,850
	As per Question ,
	Assume that Chapman Company Acquired Abernetty Common stock by
	paying In cash $	8,02,850
	Chapman used Equiy method of accounting ( partial) to account for its Investment
	So we ned to calculate Goodwill - Excess of fair value paid in cash > Book Value
	$ 802850-$638850
	Goodwill $	1,64,000
	Accounted Goodwill Enty
2	Details	Debit($)	Credit($)
	Goodwill	1,64,000
	Investement in Abernethy( Subsidiary)		1,64,000
3	Prepare entry to eliminate Intra entity - Income Accrual
	for the current year- based on partial Equity method
	During 2017 . Subsidiary reported net Income $			1,24,000
	Declaring dividend $			16,000
	Accounted Elimination entry
	Details	Debit($)	Credit($)
	Earming on Subsidiary	1,24,000
	Investement in Abernethy( Subsidiary)		1,24,000
	Divided Declared
4	Details	Debit($)	Credit($)
	Investement in Abernethy( Subsidiary)	16,000
	Divided \		16,000
5	Amortization - We should not pass any Entry in this matter
6	Entry - Year 2018 - No Entry relates to Amortization
7	Details		Debit($)	Credit($)
	additional paid up capital		50,000
	Common Stock		2,50,000
	Reatined Earnings		4,46,850
	Investement in Abernethy( Subsidiary)			7,46,850
	Reatined Earnings	Amnt($)
	Opening	3,38,850
	Add- Income Accried	1,24,000
	Less divided	16,000
	Closing retained Earnings	4,46,850
	Accounted Goodwill Enty
8	Details	Debit($)	Credit($)
	Goodwill	1,64,000
	Investement in Abernethy( Subsidiary)		1,64,000
9	Details	Debit($)	Credit($)
	Earming on Subsidiary	1,64,750
	Investement in Abernethy( Subsidiary)		1,64,750
10	Divided Declared
	Details	Debit($)	Credit($)
	Investement in Abernethy( Subsidiary)	60,000
	Divided \		60,000