Problem 5-32 (Algo) (LO 5-2,5-3,5-4,5-5) On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $348,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $205,800. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $232,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $52,300 and an unrecorded customer list (15-year remaining life) assessed at a $46,800 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 McIlroy $121,500 112,500 Transfer Price to Stinson $151, 875 150,000 Ending Balance (at transfer price) $50, 625 37,500 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 Retained earnings, 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) McIlroy, Inc. $ (705,000) 463,300 189,400 (32,580) $ (84,880) $ (732, 200) (84,880) 45,500 $ (771,580) $ 262,000 246,200 401,025 312,000 222,800 0 Stinson, Inc. $ (342,000) 209,200 71,400 0 $ (61,400) $ (280,500) (61,400) 15,400 $ (326,500) $ 148,700 129,600 0 202,700 86,300 20,400 AzVVV 401,025 312,000 222,800 YLLUE Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities $ 1,444,025 $ (372, 445) (300,000) (771,580) $(1,444,025) 0 202,700 86,300 20,400 $ 587,700 $ (161,200) (100,000) (326,500) $ (587,700) (Note: Parentheses indicate a credit balance.) a. Show how Mcllroy determined the $401,025 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 McIlroy determined the $401,025 Investment in Stinson account balance. Assume that McIlroy 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.) MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Stinson Debit Credit NCI Consolidated Totals $ Mcllroy (705,000) $ 463,300 189,400 (32,580) (84,880) (342,000) 209,200 71,400 0 (61,400) 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 (732,200) (84,880) 45,500 (771,580)| $ 262,000 $ 246,200 (280,500) (61,400) 15,400 (326,500) 148,700 129,600 $ Retained earnings 12/31/21 Cash and receivables S 401,025 312,000 Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list 0 202,700 86,300 222,800 0 20,400 Goodwill $ 1,444,025 $ (372,445) (300,000) 587,700 (161,200) (100,000) Total assets Liabilities Common stock Noncontrolling interest 1/1/21 Noncontrolling interest 12/31/21 Retained earnings 12/31/21 Total liabilities and equities (771,580) (1,444,025) $ (326,500) (587,700) S Required a
