Question

On January 1, 2017, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $346,200. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $204,600. Also, the acquisition date fair value of the 40 percent noncontrolling interest was $230,800. The subsidiary held patents with a 10-year remaining life that were undervalued within the company's accounting records by $79.900 and an unrecorded customer list (15-year remaining life) assessed at a $55,800 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 2017 2018 Cost to McIlroy $129,000 112,800 Transfer Price to Stinson $161,25e 150,400 Ending Balance (at transfer price) $53,750 37,600 The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow, Stinson, Inc. $ (371,600) 226,600 77,200 $ $ Sales Cost of goods sold Operating expenses Equity in earnings in Stinson Net Income Retained earnings, 1/1/18 Net Incos Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Total assets Liabilities Common stock Retained earnings, 12/31/18 Total liabilities and equities McIlroy, Inc. $ (738,000) 485.000 198,860 (34,646) 5 (68,784) $ (789,600) (88,784) 46.600 3 (129,786) 282,900 265,700 398,828 343,000 244,900 (67,200) (283,300) (67,200) 19 100 (331,400) 150,900 131,500 3 $ $ $ 1,535,328 $ (405,544) (300,000) (829,784) 5(1,535,328) 205,700 89,600 24.400 602,100 (170,700) (100,000) 31.40) (682,100) 5 0. Show how Mcllroy determined the $398,828 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, 2018

Answer 1

Answer As Per the required data calculations as below. lets do the er monation of investment in Stinson balana oivros Explanation Consideration transferred Stinso's incomo Creport) @ 283300 - 204600 $3 46200 $78700 Soin Excess fair value amortization $-11710 ed net income $66990 60%. & ullay Meitroy ownership heb (as per data] McIlroy share of DO19 stinson Income deferred Profit oo down steam sales [2017) $-10750 929444 Balan a @ 12/31/17 $375644 $67200 2018 Stinson's report Income excess fair value $ - 117 PO

$ 55490 60%. $33294 Adjusted net income mcIlroy ownership McIlroy share on Stinson income Profit - 2017 deffered Profit - 2018 $1075o & quoo $ 34 buy dividend share in stinson @ (19100 x 60%) $- 11ubo Balance $ 398828 @ 12/31/18 so from the above calculations we can say that the closing balance is $ 398 828