On January 1, 2017, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $312,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $184,400. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $208,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $83,200 and an unrecorded customer list (15-year remaining life) assessed at a $58,800 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. Intra-entity inventory sales between the two companies have been made as follows: Year 2017 2018 Cost to McIlroy $ 132,900 113,100 Transfer Price to Stinson $ 166,125 150,800 Ending Balance (at transfer price) $55,375 37,700 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) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities McIlroy, Inc. $ (747,000) 490,900 200,590 (35,946) (91,456) $ (814,500) (91,456) 49,700 $ (856,256) 291,900 274,200 377,467 353,000 251,900 Stinson, Inc. $ (382,000) 233,200 79,400 0 $ (69,400) $ (284,300) (69,400) 20,000 $ (333, 700 ) $ 151,900 132,400 0 207,200 90,600 25, 300 $ 607,400 $ (173, 700 ) (100,000) (333,700) $ (607,400) $ 1,548,467 $ (392, 211) (300,000) (856, 256) $(1,548,467) a. Show how Mcllroy determined the $377,467 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 $377,467 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 $ 0 Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the NCI and Consolidated Totals columns should be entered with a minus sign.) Show less MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Stinson Debit Credit Accounts Mcllroy NCI Consolidated Totals $ (747,000) 490,900 200,590 (35,946) (91,456) (382,000) 233,200 79,400 07 (69,400) 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) $ $ (814,500) (91,456) 49,700 (856,256) 291,900 274,200 377,467 353,000 $ $ (284,300) (69,400) 20,000 (333,700) 151,900 132,400 207,200 Investment in Stinson Buildings (net) Equipment (net) Patents (net) 377,467 353,000 251,900 0 207,200 90,600 25,300 Customer list Goodwill Total assets $ Liabilities 1,548,467 (392,211) (300,000) 607,400 (173,700) (100,000) Common stock Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 Total liabilities and equities | $ (856,256) (1,548,467) $ (333,700) (607,400)| $ 0 $ 0 On January 1, 2017, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $312,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $184,400. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $208,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $83,200 and an unrecorded customer list (15-year remaining life) assessed at a $58,800 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. Intra-entity inventory sales between the two companies have been made as follows: Year 2017 2018 Cost to McIlroy $ 132,900 113,100 Transfer Price to Stinson $ 166,125 150,800 Ending Balance (at transfer price) $55,375 37,700 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) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities McIlroy, Inc. $ (747,000) 490,900 200,590 (35,946) (91,456) $ (814,500) (91,456) 49,700 $ (856,256) 291,900 274,200 377,467 353,000 251,900 Stinson, Inc. $ (382,000) 233,200 79,400 0 $ (69,400) $ (284,300) (69,400) 20,000 $ (333, 700 ) $ 151,900 132,400 0 207,200 90,600 25, 300 $ 607,400 $ (173, 700 ) (100,000) (333,700) $ (607,400) $ 1,548,467 $ (392, 211) (300,000) (856, 256) $(1,548,467) a. Show how Mcllroy determined the $377,467 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 $377,467 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 $ 0 Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the NCI and Consolidated Totals columns should be entered with a minus sign.) Show less MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Stinson Debit Credit Accounts Mcllroy NCI Consolidated Totals $ (747,000) 490,900 200,590 (35,946) (91,456) (382,000) 233,200 79,400 07 (69,400) 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) $ $ (814,500) (91,456) 49,700 (856,256) 291,900 274,200 377,467 353,000 $ $ (284,300) (69,400) 20,000 (333,700) 151,900 132,400 207,200 Investment in Stinson Buildings (net) Equipment (net) Patents (net) 377,467 353,000 251,900 0 207,200 90,600 25,300 Customer list Goodwill Total assets $ Liabilities 1,548,467 (392,211) (300,000) 607,400 (173,700) (100,000) Common stock Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 Total liabilities and equities | $ (856,256) (1,548,467) $ (333,700) (607,400)| $ 0 $ 0