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On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $372,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $219,900. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $248,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $79,300 and an unrecorded customer list (15-year remaining life) assessed at a $54,900 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 Mellroy $127,800 112,800 Transfer Price to Stinson $159,750 150,400 Ending Balance (at transfer price) $53, 250 37,600 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 McIlroy, Inc. $ (736,000) 483,700 198,540 (34,256) $ (88,016) $ (780, 200) (88,016) 48,300 Stinson, Inc. $ (368,000) 224,800 76,600 0 $ (66,600) $ (283,000) (66,600) 19,000 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow. McIlroy, Inc. $ (736,000) 483,700 198,540 (34,256) $ (88,016) S (780, 200) (88,016) 48,300 $ (819,916) 279,400 262,400 415,112 339,000 242,000 0 $ 1,537,912 $ (417,996) (300,000) (819,916) $(1,537,912) 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 Stinson, Inc. $ (368,000) 224,800 76,600 0 $ (66,600) $ (283,000) (66,600) 19,000 (330,600) $ 150,500 131,200 0 205,600 89,400 24,000 $ 600, 700 $ (170, 100) (100,000) (330,600) $ (600,700) s (Note: Parentheses indicate a credit balance.) a. Show how Mcllroy determined the $415,112 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 $415,112 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 $ Check $ (736,000) $ 483,700 198,540 (34,256) (88,016) (368,000) 224,800 76,600 0 (66,600) 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 Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets $ $ (780,200) (88,016 48,300 (819,916) $ 279,400 $ 262,400 415,112 339,000 242,000 0 (283,000) (66,600) 19,000 (330,600) 150,500 131,200 0 205,600 89.400 24,000 $ 1,537,912S 600,700 $ $ (780,200) (88,016) 48,300 (819,916) $ 279,400 $ 262,400 415,112 339,000 242,000 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 (not) 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 (283,000) (66,600) 19,000 (330,600) 150,500 131,200 0 205,600 89.400 24,000 0 $ 1,537,912 5 (417,996) (300,000) 600,700 (170,100) (100,000) (819,916) (1,537,912) S (330,600) (600,700) $ $ 0 $
