On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $372,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $220,000. Also, the acquisition-date fair value of the 40 percent non-controlling interest was $248,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $70,000 and an unrecorded customer list (15-year remaining life) assessed at a $45,000 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:

The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow:
_____________________________________________ McIlroy, Inc. ______ Stinson, Inc.
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (700,000) . . . . . . . . $(335,000)
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .460,000 . . . . . . . . . . . 205,000
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,000 . . . . . . . . . . . . 70,000
Equity in earnings in Stinson . . . . . . . . . . . . . . . . . . . . . . . . (28,000) . . . . . . . . . . . . . -0-
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (80,000) . . . . . . . . $ (60,000)

a. Show how McIlroy determined the $411,000 Investment in Stinson account balance. Assume that McIlroy 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, 2018?

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Transfer Price to Stinson Ending Balance (at transfer price) Year Cost to Mcllroy 2017 2018 519 8383313 $50,000 40,000 12,000 Mcllroy, Inc. Stinson, Inc. (80,000) 5,000 (60,000) 15,000 Dividends declared Retained earnings, 12/31/18 $ 730,000) (325,000 233,000 411,000 308,000 220,000 129,000 202,000 20,000 Patents (net)... Total assets Liabilities Common stock S (390,000) $(160,000) 300,000 100,000) $1420000 (585000