On January 1, 2014, Meyer Company acquired MacNeill Corporation by issuing 42,50
ID: 2470021 • Letter: O
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: 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. 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 ) (85,800 ) 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
Explanation / Answer
A)
Dr. Equity Investment A/c $318,750
Cr.Common Stock $42,500
Cr. Additional Paid-In Capital $276,250
B)
Equity Income = $46,200 - 2,000 - 6,000 = $38,200
C)
$318,750
D)
Journal entry
(a)
Dr. Equity Income $39,200
Cr. Dividends $13,860
Cr. Equity Investment $25,340
(b)
Dr. Retained Earnings $170,500
Dr. Common Stock $22,500
Dr. Additional Paid-In Capital $ 27,000
Cr.Equity Investment $ 220,000
(c)
Dr. Building $20,000
Dr. Customer List $60,000
Dr. Goodwill $18,750
Cr. Equity Investment $98,750
Goodwill = $318,750 -220,000 - 20,000 - 60,000
(d)
Dr. Depreciation Expense $2,000
Dr. Amortization Expense $6,000
Cr. Building (net) $2,000
Cr. Customer list $6,000
Beginning balance$318,750
Equity income $38,200 Dividends (13,860) Ending balance $343,090Related Questions
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