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: Year 2017 2018 Cost to McIlroy $124,800 112,500 Transfer Price to Stinson $156,000 150,000 Ending Balance (at transfer price) $52,000 37,500 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow: Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) McIlroy, Inc. $ (720,000) 473,200 194, 415 (33,071) $ (85,456) $ (761,700) (85, 456) 47,000 $ (800, 156) 272,700 256,100 390, 477 332,000 237,100 Stinson, Inc. $ (357,000) 218,200 74,400 0 $ (64,400) $ (281, 800) (64,400) 17,200 $ (329,000) $ 149,800 130, 600 0 203,900 87,800 22,300 Stinson, Inc. $ (357,000) 218, 200 74,400 0 $ (64,400) McIlroy, Inc. $ (720,000) 473,200 194,415 (33,071) $ (85,456) $ (761,700) ( 85,456) 47,000 $ (800,156) 272,700 256,100 390,477 332,000 237,100 0 $ (281,800) (64,400) 17, 200 $ (329,000) Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities $ 149,800 130,600 0 203,900 87,800 22,300 594,400 $ 1,488,377 $ $ (388,221) (300,000) (800, 156) $ (1,488,377) $ (165, 400) (100,000) (329,000) $ (594,400) a. Show how Mcllroy determined the $390,477 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream intra-entity profits against its share of Stinson's income. b. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018. Complete this question by entering your answers in the tabs below. Required A Required B Show how McIlroy determined the $390,477 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 - Required A Required B > NCI MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Mcllroy Stinson Debit Credit (720,000) $ (357,000) 473,200 218,200 194,415 74,400 (33,071) (85,456) (64,400) Consolidated Totals $ 1 $ Accounts Sales Cost of goods sold Operating expenses Equity in earnings of Stinson Separate company net income Consolidated net income 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 $ $ $ $ $ (761,700) (85,456) 47,000 (800,156) 272,700 256,100 390,477 332,000 237,100 0 (281,800)| (64,400) 17,200 (329,000) 149,800 130,600 0 203,900 87,800 22,300 $ $ 1,488,377 (388,221) 594,400 (165,400) $ $ $ $ $ (329,000)| 149,800 130,600 Retained earnings, 12/31 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list (800,156) 272,700 256,100 390,477 332,000 237,100 0 203,900 87,800 22,300 Goodwill Total assets | $ $ Liabilities 1,488,377 (388,221) (300,000) 594,400 (165,400) (100,000) Common stock Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 Total liabilities and ea quities (800,156) (1,488,377) (329,000) (594,400)| $ $ $ 0 $ 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: Year 2017 2018 Cost to McIlroy $124,800 112,500 Transfer Price to Stinson $156,000 150,000 Ending Balance (at transfer price) $52,000 37,500 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow: Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) McIlroy, Inc. $ (720,000) 473,200 194, 415 (33,071) $ (85,456) $ (761,700) (85, 456) 47,000 $ (800, 156) 272,700 256,100 390, 477 332,000 237,100 Stinson, Inc. $ (357,000) 218,200 74,400 0 $ (64,400) $ (281, 800) (64,400) 17,200 $ (329,000) $ 149,800 130, 600 0 203,900 87,800 22,300 Stinson, Inc. $ (357,000) 218, 200 74,400 0 $ (64,400) McIlroy, Inc. $ (720,000) 473,200 194,415 (33,071) $ (85,456) $ (761,700) ( 85,456) 47,000 $ (800,156) 272,700 256,100 390,477 332,000 237,100 0 $ (281,800) (64,400) 17, 200 $ (329,000) Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities $ 149,800 130,600 0 203,900 87,800 22,300 594,400 $ 1,488,377 $ $ (388,221) (300,000) (800, 156) $ (1,488,377) $ (165, 400) (100,000) (329,000) $ (594,400) a. Show how Mcllroy determined the $390,477 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream intra-entity profits against its share of Stinson's income. b. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018. Complete this question by entering your answers in the tabs below. Required A Required B Show how McIlroy determined the $390,477 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 - Required A Required B > NCI MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Mcllroy Stinson Debit Credit (720,000) $ (357,000) 473,200 218,200 194,415 74,400 (33,071) (85,456) (64,400) Consolidated Totals $ 1 $ Accounts Sales Cost of goods sold Operating expenses Equity in earnings of Stinson Separate company net income Consolidated net income 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 $ $ $ $ $ (761,700) (85,456) 47,000 (800,156) 272,700 256,100 390,477 332,000 237,100 0 (281,800)| (64,400) 17,200 (329,000) 149,800 130,600 0 203,900 87,800 22,300 $ $ 1,488,377 (388,221) 594,400 (165,400) $ $ $ $ $ (329,000)| 149,800 130,600 Retained earnings, 12/31 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list (800,156) 272,700 256,100 390,477 332,000 237,100 0 203,900 87,800 22,300 Goodwill Total assets | $ $ Liabilities 1,488,377 (388,221) (300,000) 594,400 (165,400) (100,000) Common stock Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 Total liabilities and ea quities (800,156) (1,488,377) (329,000) (594,400)| $ $ $ 0 $