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On January 1, 2017, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $312,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $184,400. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $208,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $83,200 and an unrecorded customer list (15-year remaining life) assessed at a $58,800 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 receivables. Intra-entity inventory sales between the two companies have been made as follows: Year 2017 2018 Cost to McIlroy $ 132,900 113,100 Transfer Price to Stinson $ 166,125 150,800 Ending Balance (at transfer price) $55,375 37,700 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow: McIlroy, Inc. $ (747,000) 490,900 200,590 (35,946) $ (91,456) Stinson, Inc. $ (382,000) 233,200 79,400 0 $ (69,400) $ $ Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities S (814,500) (91,456) 49,700 (856,256) 291,900 274,200 377,467 353,000 251,900 0 $ (284,300) (69,400) 20,000 $ (333,700) $ 151,900 132,400 207, 200 90,600 25,300 $ 607,400 $ 1,548,467 $ (392,211) (300,000) (856,256) $ (1,548,467) $ (173,700) (100,000) (333,700) $ (607,400) MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Stinson Debit Credit Accounts Mcllroy NCI Consolidated Totals $ $ $ (747,000) 490,900 200,590 (35,946) (91,456) (382,000) 233,200 79,400 o (69,400) 150,800 9,425 12,240 35,946 $ 0 284,300 12,000 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 Net income Dividends declared Retained earnings, 12/31 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets Liabilities Common stock (284,300) (69,400) 20,000 (333,700) 151,900 132,400 $ (814,500) (91,456) 49,700 (856,256) 291,900 274,200 377,467 353,000 251,900 0 $ $ 9,425 0 207,200 90,600 25,300 74,880 54,880 93,600 8,320 3,920 $ $ 1,548,467 (392,211) (300,000) 607,400 (173,700) (100,000) 100,000 Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 Total liabilities and equities (856,256) (1,548,467)| $ (333,700) (607,400)| $ $ 816,071 $ 33,665
