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Problem 5 - 3 2 ( Algo ) ( LO 5 - 2 , 5 - 3 , 5 - 4 , 5 - 5
Problem AlgoLO
On January McIlroy, Inc., acquired a percent interest in the common stock of Stinson, Inc., for $ Stinson's book value on that date consisted of common stock of $ and retained earnings of $ Also, the acquisitiondate fair value of the percent noncontrolling interest was $ The subsidiary held patents with a year remaining life that were undervalued within the company's accounting records by $ and an unrecorded customer list year remaining life assessed at a $ fair value. Any remaining excess acquisitiondate 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 yearend, there are no intraentity payables or receivables.
Intraentity inventory sales between the two companies have been made as follows:
Year Cost to McIlroy Transfer Price
to Stinson Ending Balance
at transfer price
$ $ $
The individual financial statements for these two companies as of December and the year then ended follow:
McIlroy, Inc. Stinson, Inc.
Sales $ $
Cost of goods sold
Operating expenses
Equity in earnings in Stinson
Net income $ $
Retained earnings, $ $
Net income
Dividends declared
Retained earnings, $ $
Cash and receivables $ $
Inventory
Investment in Stinson
Buildings net
Equipment net
Patents net
Total assets $ $
Liabilities $ $
Common stock
Retained earnings,
Total liabilities and equities $ $
Note: Parentheses indicate a credit balance.
Show how McIlroy determined the $ Investment in Stinson account balance. Assume that McIlroy defers percent of downstream intraentity profits against its share of Stinsons income.
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December b Prepare a consolidated worksheet to determine approprlate balances for external financlal reporting as of December
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Required B
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 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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tableMCILROY INC., AND STINSON, INC.Consolidation WorksheetFor Year Ending December Mellroy,Stinson,Consolidation Entries,tableConsolidatedTotalsAccountsDebit,CreditSales$$$$
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