On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $351,600. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $207,900. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $234,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $88,600 and an unrecorded customer list (15-year remaining life) assessed at a $64,500 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 2020 2021 Cost to McIlroy $138,900 113,400 Transfer Price to Stinson $173,625 151,200 Ending Balance (at transfer price) $57,875 37,800 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 Dividends declared Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities McIlroy, Inc. $ (765,000) 502,800 203,285 (38,749) $ (97,664) $ (850, 200) (97,664) 52,000 $ (895,864) $ 304,600 286, 200 405,198 377,000 269,000 0 $ 1,641,998 $ ( 446,134) (300,000) (895,864) $(1,641,998) Stinson, Inc. $ (406,000) 247,600 84, 200 0 $ (74,200) $ (286,600) (74,200) 21,500 $ (339, 300) $ 154,500 134,500 0 208,800 92,300 27,300 $ 617,400 $ (178,100) (100,000) (339, 300) $ (617,400) (Note: Parentheses indicate a credit balance.) a. Show how Mcllroy determined the $405,198 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 McIlroy determined the $405,198 Investment in Stinson account balance. Assume that McIlroy 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.)
