On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $384,600. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $227,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $256,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $77,800 and an unrecorded customer list (15-year remaining life) assessed at a $53,700 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, McIlroy 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:

1. Show how McIlroy determined the $423,463 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinsons income.

2. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018

Transfer Price Ending Balance Cost to McIlroy $126,906 113,100 o Stinson (at transfer price Year 2017 2018 $158,625 150,800 $52,875 37,700 The individual financial statements for these two companies as of December 31, 2018, and Stinson, McIlroy, Inc. $ (730,000) $(366,0 ) Inc. Sales Cost of goods sold Operating expenses Equity in earnings in Stinson 223,600 76,200 479,800 196,510 (34,954) $ (87,744) (66,200) Net income Retained earnings, 1/1/18 Net income Dividends declared (771,200) (282,608) (66,200) 18,300 $ (811,244) (330,500) (87,744) 47,700 Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) $ 276,200 150,500 259,400 423,463 337,000 240,600 131,200 205,000 88,800 23,200 $ 1,536,663 $ 598,700 Total assets Liabilities Common stock Retained earnings, 12/31/18 $ (425,419) (168,200) (300,000) (100,000) (811,244) (330,500) Total liabilities and equities $ (1,536,663) (598,700)