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

A. 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.

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

On January 1, 2017, Mcliroy, 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, 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 ntra-entity inventory sales between the two companies have been made as follows Transfer Price to Stinson $151,875 150,000 Ending Balance (at transfer price) Year Cost to McIlroy 2017 2018 $121,500 112,500 $50,625 37,500 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow Stinson, McIlroy, Inc. Inc. $ (342,000) Sales Cost of goods sold Operating expenses Equity in earnings in Stinson $(705,000) 463,300 189,400 32,580 $(84,880) 209,200 71,400 Net income $ (61,400) Retained earnings, 1/1/18 Net income Dividendsdeclared $ (732,200) (84,880) $ (280,500) (61,400) 45,500 15,400 Retained earnings, 12/31/18 $ (771,580) $ (326,500) Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) $ 262,000 246,200 401,025 312,000 222,800 $ 148,700 129,600 202,700 86,300 20,400 $ 587,700 Total assets 1,444,025 Liabilities Common stock Retained earnings, 12/31/18 $ (372,445) (300,000) $ (161,200) (100,000) (771,580)( 326,500 Total liabilities and equities $ (1,444,025) $ (587,700) Consideration transferred Increase in Stinson's retained earnings 1/1/17 to 1/1/18 Excess fair value amortization 2017 ending inventory profit deferral Mcllroy's equity in earnings of Stinson for 2018 Stinson 2018 dividends declared to Mcllroy 0) Investment account balance 12/31/18 0) MCILROY, INC., AND STINSON, INC Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Totals Accounts Mcllroy Stinson Debit Credit NCI $ (705,000)S (342,000) 209,200 71,400 Sales Cost of goods sold Operating expenses Equity in earnings of Stinson Separate company net income Consolidated net income 463,300 189,400 (32,580) (84,880) (61,400) 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 Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 (732,200) (84,880) 45,500 $ (771,580) (280,500) (61,400) 15,400 (326,500) 148,700 129,600 262,000$ 246,200 401,025 312,000 222,800 202,700 86,300 20,400 $1,444,025 $ (372,445) (300,000) 587,700 (161,200) (100,000) (771,580) Total liabilities and equities$(1,444,025)$ (326,500) (587,700)$