Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $348,000. Stinson's book value on that

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $348,000. Stinson's book value on that date consisted of common stock of $100.000 and retained earnings of $205,800. Also, the acquisition date for value of the 40 percent noncontrolling interest was $232,000. The subsidiary held patents with a 10-year remaining life that were undervalued within the company's accounting records by $52,300 and an unrecorded customer list (15-year remaining life) assessed at a $46,800 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: Transfer Price Ending Balance Year Cost to McIlroy to Stinson (at transfer price) 2020 $121,500 $151,875 $50, 625 2021 112,500 150,000 37,500 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow Stinson, Inc. $ (342,000) 209, 200 71, 4ee Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net Income Retained earnings, 1/1/21 Net income Dividends declared Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets McIlroy, Inc. $(705, 000) 463,300 189,400 (32,580) $ (84,880) $ (732,280 (84, 880) 45,500 $ (771,580) $ 262,00 246,200 401,025 312,800 222, 820 $ (61,400) $ 280,500) (61,400) 15,400 $ (326,500) $ 148,700 129,60 202,700 86,300 20 400 $ 587.700 $ 1,444,025 Next > Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities $ 1,444,025 $ (372,445) (300,000) (771,580 $(1,444,025) 20,400 $ 587,700 $ (161,200) (100,000) (326,500) $ (587,700) (Note: Parentheses indicate a credit balance.) a. Show how Mcllroy determined the $401,025 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, 2021. Complete this question by entering your answers in the tabs below. Required A Required B Show how Mcllroy determined the $401,025 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream intra-entity profits against its share of Stinson's income. (Amounts to be deducted should be indicated with a minus sign.) 0 $ 0 seved MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Mcllroy Stinson Debit Credit (705,000) $ (342,000) 463,300 209.200 189,400 71,400 (32,580) 0 (84,880) (61.400) NCI Consolidated Total $ 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 1/1/21 Net Income Dividends declared Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets Liabilities $ $ (732 200) (84,880) 45,500 (771,580) $ 262,000 $ 246,200 401,025 312,000 222,800 0 (280,500) (61.400) 15,400 (326,500) 148,700 129,600 0 202.700 86,300 20,400 $ 1,444,025 $ (372.445) 587,700 (161 200) Next > 14 of 15 !!! Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities $ 1,444,025 $ (372,445) (300,000) (771,580 $(1,444,025) 20,400 $ 587,700 $ (161,200) (100,000) (326,500) $ (587,700) (Note: Parentheses indicate a credit balance.) a. Show how Mcllroy determined the $401,025 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, 2021. Complete this question by entering your answers in the tabs below. Required A Required B Show how Mcllroy determined the $401,025 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream intra-entity profits against its share of Stinson's income. (Amounts to be deducted should be indicated with a minus sign.) 0 $ 0 seved MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Mcllroy Stinson Debit Credit (705,000) $ (342,000) 463,300 209.200 189,400 71,400 (32,580) 0 (84,880) (61.400) NCI Consolidated Total $ 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 1/1/21 Net Income Dividends declared Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets Liabilities $ $ (732 200) (84,880) 45,500 (771,580) $ 262,000 $ 246,200 401,025 312,000 222,800 0 (280,500) (61.400) 15,400 (326,500) 148,700 129,600 0 202.700 86,300 20,400 $ 1,444,025 $ (372.445) 587,700 (161 200) Next > 14 of 15 !!!

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance For Non-Finance People

Authors: Sandeep Goel

2nd Edition

0367185083, 9780367185084

More Books

Students also viewed these Accounting questions

Question

Big O

Answered: 1 week ago