4. 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

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. Sales revenue Cost of goods sold Gross profit Operating expenses Equity income Net Income Meyer $550,000 (385,000 ) 165,000 (104,500 ) 39,200 $ 99,700 MacNeill $330,000 (198,000 132,000 (85,800 _______ $ 46,200 Retained Earnings, 1/1/14 Net income Dividends Retained Earnings, 12/31/14 $ 571,200 99,700 (32,040 $ 638,860 $170,500 46,200 (13,860 $202,840 Cash and receivables Inventory Equity investment Property, plant & equipment (Net) Total Assets $ 96,995 106,700 344,090 506,305 $1,054,090 $161,590 98,340 Accounts payable Accrued liabilities Notes payable Common stock Additional paid-in capital Retained Earnings, 12/31/14 Total Liabilities and Equities $ 33,330 47,850 0 62,900 271,150 638,860 $1,054,090 $ 38,390 41,140 110,000 22,500 27,000 202,840 $441,870 ) 181,940 $441,870 ) ) )