On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $346,200. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $204,600. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $230,800. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $79,900 and an unrecorded customer list (15-year remaining life) assessed at a $55,800 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	$129,000	$161,250	$53,750
2018	112,800	150,400	37,600

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

Page 255

	McIlroy, Inc.	Stinson, Inc.
Sales	$ (738,000)	$(371,000)
Cost of goods sold	485,000	226,000
Operating expenses	198,860	77,200
Equity in earnings in Stinson	(34,644)	0
Net income	$ (88,784)	$ (67,200)
Retained earnings, 1/1/18	$ (789,600)	$(283,300)
Net income	(88,784)	(67,200)
Dividends declared	48,600	19,100
Retained earnings, 12/31/18	$ (829,784)	$(331,400)
Cash and receivables	$ 282,900	$ 150,900
Inventory	265,700	131,500
Investment in Stinson	398,828	0
Buildings (net)	343,000	205,700
Equipment (net)	244,900	89,600
Patents (net)	0	24,400
Total assets	$ 1,535,328	$ 602,100
Liabilities	$ (405,544)	$(170,700)
Common stock	(300,000)	(100,000)
Retained earnings, 12/31/18	(829,784)	(331,400)
Total liabilities and equities	$(1,535,328)	$(602,100)

1. Show how McIlroy determined the $398,828 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.