Reference no: EM131710254

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.