Problem 5-31 (LO 5-2,5-3,5-4,5-5) On January 1, 2017, 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 2017 Cost to McIlroy $134,700 112,500 Transfer Price to Stinson $168, 375 150,000 Ending Balance (at transfer price) $56, 125 37,500 2018 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow Stinsol, Inc. $ (388,000) 236.80 80.600 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) McIlroy, Inc. $ 250,000) 492,900 200.810 (36,734) $ (93,024) $ 618,600) (93.024) 50.200 $ 1861,424) 293,300 275.500 404, 613 358,000 100 $ (70,600) 51285,000) (70,600) 20,200 5 (335,400) 5 152,700 133,000 207,600 Problem 5-31 (LO 5-2,5-3,5-4,5-5) On January 1, 2017, 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 2017 Cost to McIlroy $134,700 112,500 Transfer Price to Stinson $168, 375 150,000 Ending Balance (at transfer price) $56, 125 37,500 2018 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow Stinsol, Inc. $ (388,000) 236.80 80.600 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) McIlroy, Inc. $ 250,000) 492,900 200.810 (36,734) $ (93,024) $ 618,600) (93.024) 50.200 $ 1861,424) 293,300 275.500 404, 613 358,000 100 $ (70,600) 51285,000) (70,600) 20,200 5 (335,400) 5 152,700 133,000 207,600
