On January 1, 2017, Mcllroy, Inc, acquired a 60 percent interest in the common stock of Stinson, Inc., for $334,200. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $197,600. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $222,800. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $75,700 and an unrecorded customer list (15-year remaining life) assessed at a $51,300 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. Intra-entity inventory sales between the two companies have been made as follows: Transfer Price to Stinson $156,000 Ending Balance (at transfer price) $52,000 37,500 Cost to McIlroy $124,800 112,500 Year 2017 2018 150,000 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow McIlroy, Inc. $ (720,000) 473,200 194,415 (33,071) Stinson, Inc. $ (357,000) 218,200 74,400 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson (85,456) (64,400) Net income $ (281,800) (64,400) 17,200 (761,700) (85,456) Retained earnings, 1/1/18 Net income Dividends declared 47,000 $ (800,156) $ (329,000) Retained earnings, 12/31/18 Cash and receivables 272,700 149,800 130,600 Inventory Investment in Stinson 256,100 390,477 332,000 237,100 Buildings (net) Equipment (net) Patents (net) 203,900 87,800 22,300 $ 1,488,377 Total assets 594,400 $ (388,221) (300,000) (800,156) $ (165,400) (100, 000) (329, 000) Liabilities Common stock Retained earnings, 12/31/18 $(594,400) Total liabilities and equities $(1,488,377) Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018 MCILROY, INC, AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Debit Credit Accounts Mcllroy Stinson NCI Totals Sales (720.000) (357,000) 150,000 (927.000) Cost of goods sold 9,375 473.200 218.200 160,400 540,375 Operating expenses 194.415 74.400 10.900 279.805 Equity in earnings of Stinson (33.071) O 33.071 Separate company net (85.456) (64,400) income Consolidated net income (106,820) To noncontrolling (21,384) 21,384 interest (85.458) To Mcllroy. Inc. Retained earnings, 1/1 (781.700) (281.800) Net income (85,456) (64.400) Dividends declared 47,000 17.200 (800,156) (329.000) Retained earnings. 12/31 Cash and receivables 272.700 149,800 Inventory 256.100 130,600 Investment in Stinson 300.477 203,900 Buildings (net) 332.000 237.100 Equipment (net) 87.800 Patents (net) 22.300 Customer list Goodwill S 1.488.377 504,400 Total assets (388,221) (165,400) Liabilities Common stock (300,000) (100,000) Noncontrolling interest 1/1 Noncontrollling interest 12/31 100.000 Retained earnings, 12/31 (800.156) (329,000) Total liabilities and s (1.488.377) (504,400) 303.436 160,400 equities C
