On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $365,400. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $216,100. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $243,600. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $75,100 and an unrecorded customer list (15-year remaining life) assessed at a $50,700 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:

Year	Cost to McIlroy	Transfer Price to Stinson	Ending Balance (at transfer price)
2017	$124,500	$155,625	$51,875
2018	113,100	150,800	37,700

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

	McIlroy, Inc.				Stinson, Inc.
Sales	$	(717,000	)		$	(356,000	)
Cost of goods sold		471,200				217,600
Operating expenses		193,440				74,200
Equity in earnings in Stinson		(32,936	)			0
Net income	$	(85,296	)		$	(64,200	)
Retained earnings, 1/1/18	$	(753,900	)		$	(281,400	)
Net income		(85,296	)			(64,200	)
Dividends declared		46,700				16,900
Retained earnings, 12/31/18	$	(792,496	)		$	(328,700	)
Cash and receivables	$	269,800			$	149,700
Inventory		253,400				130,500
Investment in Stinson		410,467				0
Buildings (net)		328,000				203,800
Equipment (net)		234,200				87,400
Patents (net)		0				22,000
Total assets	$	1,495,867			$	593,400
Liabilities	$	(403,371	)		$	(164,700	)
Common stock		(300,000	)			(100,000	)
Retained earnings, 12/31/18		(792,496	)			(328,700	)
Total liabilities and equities	$	(1,495,867	)		$	(593,400	)

1. Show how McIlroy determined the $410,467 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.

Required A Required B Show how McIlroy determined the $410,467 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinson's income. 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 2015 dividends declared to Mcllroy Investment account balance 12/31/18