On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of...

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On January 1, 2020, 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: Ending Balance Transfer Price to Stinson $168,375 150,000 (at transfer price) $56,125 37,500 Year Cost to McIlroy 2020 2021 $134,700 112,500 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow: McIlroy, Inc. Stinson, Inc. $ (750,000) $ (388,000) 492,900 236,800 80,600 0 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson 4 200,810 (36,734) 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) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities (Note: Parentheses indicate a credit balance.) McIlroy, Inc. $ (750,000) 492,900 200, 810 (36,734) (93,024) (818,600) (93,024) 50, 200 (861,424) 293,300 275,500 $ $ $ $ 404,613 358,000 255,400 0 $ 1,586,813 $ (425,389) (300,000) (861,424) $(1,586,813) Stinson, Inc. $ (388,000) 236,800 80,600 0 $ (70,600) $ (285,000) (70,600) 20, 200 (335,400) 152,700 133,000 $ $ 207,600 91,000 25,800 $ 610, 100 $ (174,700) (100,000) (335,400) $ (610,100) Complete this question by entering your answers in the tabs below. Required A Required B Show how McIlroy determined the $404,613 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.) Required A Dra n $ Required B > Accounts 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 Retained earnings 12/31/21 Cash and receivables Inventory For Year Ending December 31, 2021 $ $ Mcllroy $ (750,000) $ 492,900 200,810 (36,734) (93,024) (818,600) (93,024) 50,200 (861,424) $ 293,300 $ 275.500 < Prev Stinson (388,000) 236,800 80,600 0 (70,600) (285,000) (70,600) 20,200 (335,400) 152,700 133.000 9 of 12 www *** Consolidation Entries Credit Debit Next > NCI Consolidated Totals Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets Liabilities Common stock Noncontrolling interest 1/1/21 Noncontrolling interest 12/31/21 Retained earnings 12/31/21 Total liabilities and equities SS $ $ $ (861,424) $ 293,300 $ 275,500 404,613 358,000 255,400 0 1,586,813 $ (425,389) (300,000) (861,424) $ (1,586,813) S (335,400) 152,700 133,000 0 207,600 1,000 25,800 610,100 (174,700) (100,000) (335,400) (610,100) $ 0 $ On January 1, 2020, 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: Ending Balance Transfer Price to Stinson $168,375 150,000 (at transfer price) $56,125 37,500 Year Cost to McIlroy 2020 2021 $134,700 112,500 The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow: McIlroy, Inc. Stinson, Inc. $ (750,000) $ (388,000) 492,900 236,800 80,600 0 Sales Cost of goods sold Operating expenses Equity in earnings in Stinson 4 200,810 (36,734) 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) Total assets Liabilities Common stock Retained earnings, 12/31/21 Total liabilities and equities (Note: Parentheses indicate a credit balance.) McIlroy, Inc. $ (750,000) 492,900 200, 810 (36,734) (93,024) (818,600) (93,024) 50, 200 (861,424) 293,300 275,500 $ $ $ $ 404,613 358,000 255,400 0 $ 1,586,813 $ (425,389) (300,000) (861,424) $(1,586,813) Stinson, Inc. $ (388,000) 236,800 80,600 0 $ (70,600) $ (285,000) (70,600) 20, 200 (335,400) 152,700 133,000 $ $ 207,600 91,000 25,800 $ 610, 100 $ (174,700) (100,000) (335,400) $ (610,100) Complete this question by entering your answers in the tabs below. Required A Required B Show how McIlroy determined the $404,613 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.) Required A Dra n $ Required B > Accounts 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 Retained earnings 12/31/21 Cash and receivables Inventory For Year Ending December 31, 2021 $ $ Mcllroy $ (750,000) $ 492,900 200,810 (36,734) (93,024) (818,600) (93,024) 50,200 (861,424) $ 293,300 $ 275.500 < Prev Stinson (388,000) 236,800 80,600 0 (70,600) (285,000) (70,600) 20,200 (335,400) 152,700 133.000 9 of 12 www *** Consolidation Entries Credit Debit Next > NCI Consolidated Totals Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwill Total assets Liabilities Common stock Noncontrolling interest 1/1/21 Noncontrolling interest 12/31/21 Retained earnings 12/31/21 Total liabilities and equities SS $ $ $ (861,424) $ 293,300 $ 275,500 404,613 358,000 255,400 0 1,586,813 $ (425,389) (300,000) (861,424) $ (1,586,813) S (335,400) 152,700 133,000 0 207,600 1,000 25,800 610,100 (174,700) (100,000) (335,400) (610,100) $ 0 $