On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $348,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $205,800. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $232,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $52,300 and an unrecorded customer list (15-year remaining life) assessed at a $46,800 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:

Year	Cost to McIlroy	Transfer Price to Stinson	Ending Balance (at transfer price)
2017	$121,500	$151,875	$50,625
2018	112,500	150,000	37,500

The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow:

	McIlroy, Inc.				Stinson, Inc.
Sales	$	(705,000	)		$	(342,000	)
Cost of goods sold		463,300				209,200
Operating expenses		189,400				71,400
Equity in earnings in Stinson		(32,580	)			0
Net income	$	(84,880	)		$	(61,400	)
Retained earnings, 1/1/18	$	(732,200	)		$	(280,500	)
Net income		(84,880	)			(61,400	)
Dividends declared		45,500				15,400
Retained earnings, 12/31/18	$	(771,580	)		$	(326,500	)
Cash and receivables	$	262,000			$	148,700
Inventory		246,200				129,600
Investment in Stinson		401,025				0
Buildings (net)		312,000				202,700
Equipment (net)		222,800				86,300
Patents (net)		0				20,400
Total assets	$	1,444,025			$	587,700
Liabilities	$	(372,445	)		$	(161,200	)
Common stock		(300,000	)			(100,000	)
Retained earnings, 12/31/18		(771,580	)			(326,500	)
Total liabilities and equities	$	(1,444,025	)		$	(587,700	)

1. Show how McIlroy determined the $401,025 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.