advanced accounting 431035

Aug 29, 2021 | Uncategorized

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2012. As of that date, Abernethy has the following trial balance:

Debit Credit
Accounts payable $ 52,800
Accounts receivable $ 49,500
Additional paid in capital 50,000
Buildings (net) (4 year life) 174,000
Cash and short term investments 84,000
Common stock 250,000
Equipment (net) (5 year life) 315,000
Inventory 137,500
Land 90,500
Long term liabilities (mature 12/31/15) 188,500
Retained earnings, 1/1/12 323,600
Supplies 14,400
Totals $ 864,900 $ 864,900

During 2012, Abernethy reported income of $129,000 while paying dividends of $16,000. During 2013, Abernethy reported income of $176,000 while paying dividends of $38,000.

Assume that Chapman Company acquired Abernethy’s common stock for $731,110 in cash. Assume that the equipment and long term liabilities had fair values of $338,650 and $156,340, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.

Prepare consolidation worksheet entries for December 31, 2012, and December 31

General Journal Debit Credit
Dec. 31, 2012
Entry S (Click to select)Additional Paid In CapitalInvestment in AbernethyCommon Stock AbernethyDepreciation ExpenseDividends PaidEquipmentInterest ExpenseRetained Earnings, 1/1/12
(Click to select)Depreciation ExpenseCommon Stock AbernethyInvestment in AbernethyDividends PaidRetained Earnings, 1/1/12Interest ExpenseAdditional Paid In CapitalEquipment
(Click to select)Interest ExpenseCommon Stock AbernethyInvestment in AbernethyRetained Earnings, 1/1/12EquipmentAdditional Paid In CapitalDividends PaidDepreciation Expense
(Click to select)Dividends PaidInvestment in AbernethyCommon Stock AbernethyRetained Earnings, 1/1/12GoodwillDividend IncomeAdditional Paid In CapitalInterest Expense
Entry A (Click to select)Depreciation ExpenseEquipmentLong Term LiabilitiesInvestment in AbernethyRetained Earnings, 1/1/12Dividends PaidCommon Stock AbernethyGoodwill
(Click to select)Depreciation ExpenseLong Term LiabilitiesEquipmentInvestment in AbernethyGoodwillDividends PaidRetained Earnings, 1/1/12Common Stock Abernethy
(Click to select)Depreciation ExpenseLong Term LiabilitiesCommon Stock AbernethyInvestment in AbernethyEquipmentGoodwillRetained Earnings, 1/1/12Dividends Paid
(Click to select)Interest ExpenseInvestment in AbernethyDepreciation ExpenseRetained Earnings, 1/1/12Long Term LiabilitiesDividend IncomeDividends PaidGoodwill
Entry I (Click to select)Dividend IncomeGoodwillInvestment in AbernethyLong Term LiabilitiesEquipmentDividends PaidRetained Earnings, 1/1/12Additional Paid In Capital
(Click to select)Dividends PaidLong Term LiabilitiesRetained Earnings, 1/1/12Investment in AbernethyGoodwillEquipmentAdditional Paid In CapitalDividend Income
Entry E (Click to select)Depreciation ExpenseLong Term LiabilitiesAdditional Paid In CapitalInvestment in AbernethyInterest ExpenseRetained Earnings, 1/1/12EquipmentGoodwill
(Click to select)GoodwillAdditional Paid In CapitalInvestment in AbernethyInterest ExpenseEquipmentRetained Earnings, 1/1/12Long Term LiabilitiesDepreciation Expense
(Click to select)GoodwillLong Term LiabilitiesDepreciation ExpenseDividends PaidInterest ExpenseDividend IncomeInvestment in AbernethyEquipment
(Click to select)Long Term LiabilitiesGoodwillEquipmentDividend IncomeDividends PaidInvestment in AbernethyInterest ExpenseDepreciation Expense
Dec. 31, 2013
Entry *C (Click to select)Interest ExpenseGoodwillEquipmentDividend IncomeCommon Stock AbernethyRetained Earnings, 1/1/13Dividends PaidInvestment in Abernethy
(Click to select)Investment in AbernethyLong Term LiabilitiesRetained Earnings, 1/1/13Interest ExpenseDividend IncomeGoodwillCommon Stock AbernethyDividends Paid
Entry S (Click to select)Depreciation ExpenseEquipmentRetained Earnings, 1/1/13Common Stock AbernethyGoodwillLong Term LiabilitiesAdditional Paid In CapitalInvestment in Abernethy
(Click to select)Common Stock AbernethyInvestment in AbernethyAdditional Paid In CapitalEquipmentDepreciation ExpenseGoodwillLong Term LiabilitiesRetained Earnings, 1/1/13
(Click to select)EquipmentGoodwillCommon Stock AbernethyInvestment in AbernethyAdditional Paid In CapitalRetained Earnings, 1/1/13Long Term LiabilitiesDepreciation Expense
(Click to select)Investment in AbernethyDepreciation ExpenseCommon Stock AbernethyDividend IncomeRetained Earnings, 1/1/13Additional Paid In CapitalDividends PaidInterest Expense
Entry A (Click to select)Common Stock AbernethyDepreciation ExpenseEquipmentInvestment in AbernethyAdditional Paid In CapitalGoodwillLong Term LiabilitiesRetained Earnings, 1/1/13
(Click to select)GoodwillInvestment in AbernethyCommon Stock AbernethyRetained Earnings, 1/1/13Additional Paid In CapitalLong Term LiabilitiesEquipmentDepreciation Expense
(Click to select)Investment in AbernethyAdditional Paid In CapitalDepreciation ExpenseEquipmentRetained Earnings, 1/1/13Long Term LiabilitiesCommon Stock AbernethyGoodwill
(Click to select)Investment in AbernethyGoodwillDividends PaidEquipmentLong Term LiabilitiesDividend IncomeInterest ExpenseRetained Earnings, 1/1/13
Entry I (Click to select)GoodwillDividends PaidLong Term LiabilitiesEquipmentAdditional Paid In CapitalDividend IncomeRetained Earnings, 1/1/13Investment in Abernethy
(Click to select)Long Term LiabilitiesEquipmentInterest ExpenseGoodwillDividends PaidAdditional Paid In CapitalRetained Earnings, 1/1/13Dividend Income
Entry E (Click to select)Interest ExpenseEquipmentDepreciation ExpenseCommon Stock AbernethyLong Term LiabilitiesDividends PaidInvestment in AbernethyDividend Income
(Click to select)Long Term LiabilitiesDividends PaidCommon Stock AbernethyInvestment in AbernethyInterest ExpenseDepreciation ExpenseDividend IncomeEquipment
(Click to select)Additional Paid In CapitalRetained Earnings, 1/1/13EquipmentInvestment in AbernethyInterest ExpenseGoodwillDepreciation ExpenseLong Term Liabilities
(Click to select)GoodwillEquipmentAdditional Paid In CapitalDepreciation ExpenseLong Term LiabilitiesRetained Earnings, 1/1/13Interest ExpenseInvestment in Abernethy

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eBook: Subsequent Consolidations Investment Recorded Using Initial Value or Partial Equity Method
Worksheet Difficulty: 3 Hard
Problem 3 21 [LO4b] Learning Objective: 03 04b Prepare consolidated financial statements subsequent to acquisition when the parent has applied the initial value method in its internal records.
eBook: Subsequent Consolidations Investment Recorded Using Initial Value or Partial Equity Method
Worksheet Difficulty: 3 Hard
Problem 3 21 [LO4b] Learning Objective: 03 04b Prepare consolidated financial statements subsequent to acquisition when the parent has applied the initial value method in its internal records.