Question

8-Morningside Co. acquires, at book value, Glacier Industries on January 2, 2019, by issuing 40,000 common shares, $1 par, wi
Equity income 41,500 Net Income $100,100 $41,500 Retained Earnings, 1/1/19 $550,000 $219,600 Net income 100,100 41,500 Divide
Cash and receivables $450,000 $25,000 Inventory 355,000 12,570 Equity investment 427,850 Property, plant & equipment (Net) 75
Common stock 30,000 21,900 Additional paid-in 487,000 capital 38,500 Retained Earnings, 12/31/19 609,100 247,450 Total Liabil
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Journal entries
a Debit Credit
Equity investment 400000
To cash 400000
initial investments
Equity investments 41500
To income from subsidiary 41500
(to record net income)
Cash 13650
To equity investment 13650
(dividends received)
b Equity investment
Particulars Amount Particulars Amount
Beg balance 0 dividend 13650
Cash 400000 Balance 427850
Income from subsidiary 41500
441500 441500
C consolidation entries
Income from subsidiary 41500
To dividends 13650
To equity investment 27850
Common stock 21900
Retained earnings at 1/1 38500
Additional paid in capital 219600
Difference (cost & book) 120000
To equity investment 400000
Goodwill 120000
To difference (cost & book) 120000
Income statement
Morningside co Glacier industries Debit Credit Consolidated
Sales revenue 850000 400000 1250000
Cost of goods sold -635000 -268000 -903000
Gross profit 215000 132000 347000
operating expense -156400 -90500 -246900
Equity income 41500 41500 0
Net income 100100 41500 100100
Retained earnings Morningside co Glacier industries Debit Credit Consolidated
Reatined earnings 1/1 550000 219600 219600 550000
Net income 100100 41500 41500 100100
Dividends -41000 -13650 -13650 -41000
Retained earnings 31/12 609100 247450 609100
Balancesheet
Morningside co Glacier industries Debit Credit Consolidated
Cash and receivables 450000 25000 475000
inventory 355000 12570 367570
Equity investment 427850 427850 0
propoerty plant and equipment 751950 412390 1164340
Goodwill 120000 120000
total assets 1984800 449960 2126910
Accounts payable 371200 54000 425200
Accrued liabilities 487500 68110 555610
Notes payable 20000 20000
Common stock 30000 21900 21900 30000
additional paid in capital 487000 38500 38500 487000
retained earnings 609100 247450 247450 609100
total liabilities 1984800 449960 2126910
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