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Problem 5 - 3 2 ( Algo ) ( LO 5 - 2 , 5 - 3 , 5 - 4 , 5 - 5

Problem 5-32(Algo)(LO 5-2,5-3,5-4,5-5)
On January 1,2020, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $384,600. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $227,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $256,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $77,800 and an unrecorded customer list (15-year remaining life) assessed at a $53,700 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, McIlroy 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 Transfer Price
to Stinson Ending Balance
(at transfer price)
2020 $126,900 $158,625 $52,875
2021113,100150,80037,700
The individual financial statements for these two companies as of December 31,2021, and the year then ended follow:
McIlroy, Inc. Stinson, Inc.
Sales $ (730,000) $ (366,000)
Cost of goods sold 479,800223,600
Operating expenses 196,51076,200
Equity in earnings in Stinson (34,054)0
Net income $ (87,744) $ (66,200)
Retained earnings, 1/1/21 $ (771,200) $ (282,600)
Net income (87,744)(66,200)
Dividends declared 47,70018,300
Retained earnings, 12/31/21 $ (811,244) $ (330,500)
Cash and receivables $ 276,200 $ 150,500
Inventory 259,400131,200
Investment in Stinson 423,4630
Buildings (net)337,000205,000
Equipment (net)240,60088,800
Patents (net)023,200
Total assets $ 1,536,663 $ 598,700
Liabilities $ (425,419) $ (168,200)
Common stock (300,000)(100,000)
Retained earnings, 12/31/21(811,244)(330,500)
Total liabilities and equities $ (1,536,663) $ (598,700)
(Note: Parentheses indicate a credit balance.)
Show how McIlroy determined the $423,463 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinsons income.
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31,2021.b. Prepare a consolidated worksheet to determine approprlate balances for external financlal reporting as of December 31,2021.
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Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31,2021.(For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)
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\table[[MCILROY, INC., AND STINSON, INC.],[Consolidation Worksheet],[For Year Ending December 31,2021],[,Mellroy,Stinson,Consolidation Entries,NCl,\table[[Consolidated],[Totals]]],[Accounts,,Debit,Credit],[Sales,$,(730,000),$,(386,000),$,150,800,,,$,(845,200)
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