1.
On January 1, 2020, Mcllroy, Inc., acquired a 60 percent Interest in the common stock of Stinson, Inc., for $378,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $223,400. Also, the acquisition-date fair value of the 40 percent noncontrolling Interest was $252,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $80,800 and an unrecorded customer list (15-year remaining life) assessed at a $56,400 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Mcllroy has applied the equity method to its Investment in Stinson account and no goodwill impairment has occurred. At year-end, there are no Intra-entity payables or recelvables. Intra-entity Inventory sales between the two companies have been made as follows: Year 2020 2021 Cost to McIlroy $130,200 112,500 Transfer Price to Stinson $162,750 150,000 Ending Balance (at transfer price) $54,250 37,500 The Individual financial statements for these two companies as of December 31, 2021, and the year then ended follow. Stinson, Inc. $ (374,000) 228,400 77,800 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities McIlroy, Inc. $ (740,000) 486,300 199,215 (35,651) $ (89,536) $ (791,100) (89,536) 48,800 $ (831, 836) $ 283,400 266,200 419,637 346,000 247,000 $ (67,800) $ (283,700) (67,800) 19,400 $ (332, 100) $ 151,200 131,800 0 206,100 89,900 24,500 $ 603,500 $ (171,400) (100,000) (332, 100) $ (603,500) $ 1,562,237 $ (430, 401) (300,000) (831,836) $(1,562,237) (Note: Parentheses Indicate a credit balance.) a. Show how Mcllroy determined the $419,637 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream Intra-entity profits against its share of Stinson's Income. b. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2021 MCILRUT, INC., ANU SIINSUN, INC. Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Mcllroy Stinson Debit Credit NCI $ $ (374,000) $ 150,000 9,375 (740,000) 486,300 199,215 (35,051) (89,536) Consolidated Totals $ 964,000 563.225 288,855 228,400 77,800 0 150,000 X 10,850 x 11.840 (67,800) $ 22,384 283,700 > (283,700) (67,800) 19,400 (332,100) > 111,920 22,384 89,536 791,100 89,536 48,800 831,836 434.600 388,625 11,640 7,760 $ $ 1$ (791,100) (89,536) 48,800 (831,836) 283,400 266,200 419,637 346,000 Sales Cost of goods sold Operating expenses Equity in earnings of Stinson Separate company net income Consolidated net income To noncontrolling interest To Mcllroy, Inc. Retained earnings 1/1/21 Net income Dividends declared Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets Liabilities Common stock Noncontrolling interest 1/1/21 Noncontrolling interest 12/31/21 Retained earnings 12/31/21 Total liabilities and equities XCOCOOOOOOOOO $ $ $ $ 9,375 419,637 X 0 151,200 131,800 0 206,100 89,900 24,500 552,100 247,000 336,900 0 8,080 77,040 X 48,320 X 93,460 X 44,560 3,760 169,400 169,400 2,019,645 $ $ 603,500 $ 1,562,237 (430,401) (300,000) (171,400) (100,000) 601,801 300,000 100,000 $ 286,008 (831,836) $ (1,562,237) (332,100) (603,500) 286,008 831,836 2,019,645 $ $ 849,675 $ 613,342 $ $
