On January 1, 2020, Mcllroy, 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, 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 Cost to McIlroy 2020 Transfer Price to Stinson $155,625 150,800 2021 $124,500 113,100 Ending Balance (at transfer price) $51,875 37,700 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow: Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/21 Net income $ (717,000) McIlroy, Inc. Stinson, Inc. $ (356,000) 471,200 193,440 217,600 74,200 (32,936) 0 $ (85,296) $ (64,200) $ (753,900) (85.296) $ (281,400) (64.200) < Prev 4 of 5 Next >