On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $352,800. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $208,500. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $235,200. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $84,400 and an unrecorded customer list (15-year remaining life) assessed at a $60,300 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 2020 2021 Cost to McIlroy $134,700 112,500 Transfer Price to Stinson $168,375 150,000 Ending Balance (at transfer price) $56,125 37,500 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow: Stinson, Inc. $ (388,000) 236,800 80,600 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/21 Net income Dividends declared McIlroy, Inc. $ (750,000) 492,900 200,810 (36,734) $ (93,024) $ (818,600) (93,024) 50,200 $ (70,600) $ (285,000) (70,600) 20,200 $ "VjUue) 20,200 $ (335,400) $ 152,700 133,000 $ 39;02 50,200 (861,424) 293,300 275,500 404,613 358,000 255,400 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 $ 1,586, 813 $ (425,389) (300,000) (861,424) $(1,586,813) 207,600 91,000 25,800 $ 610,100 $ (174,700) (100,000) (335,400) $ (610,100) (Note: Parentheses indicate a credit balance.) a. Show how Mcllroy determined the $404,613 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. Show how McIlroy determined the $404,613 Investment in Stinson account balance. Assume that McIlroy defers of downstream intra-entity profits against its share of Stinson's income. (Amounts to be deducted should be indi minus sign.) Required A Required B > MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Debit Credit NCI Consolidated Totals $ Mcllroy (750,000) $ 492,900 200,810 (36,734) (93,024) Stinson (388,000) 236,800 80,600 0 (70,600) 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 $ (818,600) (93,024) 50,200 (861,424) $ 293,300 $ 275,500 404,613 (285,000) (70,600) 20,200 (335,400) 152,700 133,000 0 $ $ "YCLOHICU canny LI 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 Common stock Noncontrolling interest 1/1/21 Noncontrolling interest 12/31/21 Retained earnings 12/31/21 Total liabilities and equities VIU, VVU/ (93,024) 50,200 (861,424) $ 293,300 $ 275,500 404,613 358,000 255,400 0 ILUJ,Vuuri (70,600) 20,200 (335,400) 152,700 133,000 0 207,600 91,000 25,800 1,586,813 6 (425,389) (300,000) 610,100 (174,700) (100,000) (861,424) (1,586,813) $ (335,400) (610,100) $
