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(solution) I am having trouble figuring out retained earnings for Entry S


I am having trouble figuring out retained earnings for Entry S December 31, 2015. Please help!

Problem 3-20 (LO 3-3a)

Chapman Company obtains 100 percent of Abernethy Company?s stock on January 1, 2014. As of that date, Abernethy has the following trial balance:


 

  Debit   Credit
  Accounts payable       $ 50,300   
  Accounts receivable $ 47,500        
  Additional paid-in capital         50,000   
  Buildings (net) (4-year life)   201,000        
  Cash and short-term investments   61,750        
  Common stock         250,000   
  Equipment (net) (5-year life)   447,500        
  Inventory   127,500        
  Land   124,000        
  Long-term liabilities (mature 12/31/17)         162,000   
  Retained earnings, 1/1/14         514,850   
  Supplies   17,900        
  
  Totals $ 1,027,150     $ 1,027,150   
  


 

     During 2014, Abernethy reported net income of $97,000 while declaring and paying dividends of $12,000. During 2015, Abernethy reported net income of $141,250 while declaring and paying dividends of $48,000.


 

Assume that Chapman Company acquired Abernethy?s common stock for $933,200 in cash. As of January 1, 2014, Abernethy?s land had a fair value of $137,700, its buildings were valued at $255,400, and its equipment was appraised at $420,750. Chapman uses the equity method for this investment.


 

Prepare consolidation worksheet entries for December 31, 2014, and December 31, 2015. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 


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