Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $423,463 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinsons income.
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31,2021.b. Prepare a consolidated worksheet to determine approprlate balances for external financlal reporting as of December 31,2021.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31,2021.(For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)
Show less
\table[[MCILROY, INC., AND STINSON, INC.],[Consolidation Worksheet],[For Year Ending December 31,2021],[,Mellroy,Stinson,Consolidation Entries,NCl,\table[[Consolidated],[Totals]]],[Accounts,,Debit,Credit],[Sales,$,(730,000),$,(386,000),$,150,800,,,$,(845,200)
image text in transcribed

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

Management Accounting For Business

Authors: Colin Drury, Mike Tayles

8th Edition

1473778808, 978-1473778801

More Books

Students also viewed these Accounting questions