Question - On January 1, 2014, Meyer Company acquired MacNeill Corporation by issuing 42,500 shares of its $1 par common Stock with a market value of $7.50 per share. A building on MacNeill's books was undervalued by $20,000, resulting in annual amortization of $1,000. Also, there was an unrecorded customer list valued at $60,000, resulting in annual amortization of $6,000. The separate 2014 financial statements for Meyer and MacNeill are presented below:
|
Meyer
|
MacNeill
|
|
Sales revenue
|
$550,000
|
$330,000
|
|
Cost of goods sold
|
(385,000)
|
(198,000)
|
|
Gross profit
|
165,000
|
132,000
|
|
Operating expenses
|
(104,500)
|
(85,80)0)
|
|
Equity income
|
39,200
|
_______
|
|
Net Income
|
$99,700
|
$46,200
|
|
|
|
|
Retained Earnings, 1/1/14
|
$571,200
|
$170,500
|
|
Net income
|
99,700
|
46,200
|
|
Dividends
|
(32,040)
|
(13,860)
|
|
Retained Earnings, 12/31/14
|
$638,860
|
$202,840
|
|
|
|
|
Cash and receivables
|
$96,995
|
$161,590
|
|
Inventory
|
106,700
|
98,340
|
|
Equity investment
|
344,090
|
|
|
Property, plant & equipment (Net)
|
506,305
|
181,940
|
|
Total Assets
|
$1,054,090
|
$441,870
|
|
|
|
|
Accounts payable
|
$33,330
|
$38,390
|
|
Accrued liabilities
|
47,850
|
41,140
|
|
Notes payable
|
0
|
110,000
|
|
Common stock
|
62,900
|
22,500
|
|
Additional paid-in capital
|
271,150
|
27,000
|
|
Retained Earnings, 12/31/14
|
638,860
|
202,840
|
|
Total Liabilities and Equities
|
$1,054,090
|
$441,870
|
Required:
a. Prepare the journal entry to record the investment in the subsidiary.
b. Show the computation of Equity Income for 2014.
c. Show the computation of Equity Investment at December 31, 2014.
d. Prepare the consolidation worksheet with entries for 2014.