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 anunrecorded customer list (15-year remaining life) assessed at a $46,800 fair value. Any remaining excessacquisition-date fair value was assigned to goodwill. Since acquisition, Mcllroy has applied the equity method to itsInvestment in Stinson account and no goodwill impairment has occurred. At year-end, there are no intra-entitypayables or receivables.Intra-entity inventory sales between the two companies have been made as follows:Ending Balance(at transfer price)$50,62537,500Transfer PriceCost to McIlroy$121,500112,500Yearto Stinson$151,875150,00020202021The individual financial statements for these two companies as of December 31, 2021, and the year then endedfollow:Stinson,McIlroy, Inc.$ (705,000463,300189,400(32,580)Inc.$ (342,000)209,200SalesCost of goods soldOperating expensesEquity in earnings in Stinson71,400$ (61,400)$ (280,500)(61,400)15,400$ (326,500)$ 148,700129,600Net income$(84,880)$ (732,200)(84,880)45,500$ (771,580)Retained earnings, 1/1/21Net incomeDividends declaredRetained earnings, 12/31/21Cash and receivables$InventoryInvestment in StinsonBuildings (net)Equipment (net)Patents (net)262,000246,200401,025312,000202,70086,300222,80020,400$ 587,700$ (161,200)(100,000)(326,500)$ (587,700)Total assets$ 1,444,025(372,445)(300,000)(771,580)Liabilities$Common stockRetained earnings, 12/31/21Total liabilities and equities$(1,444,025)(Note: Parentheses indicate a credit balance.)a. Show how Mcllroy determined the $401,025 Investment in Stinson account balance. Assume that Mcllroy defers100 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 ofDecember 31, 2021.

A Acquisition-date fair value allocation and excess amortizations Consideration transferred…

nc., Stinson's book value on that date consisted of co the acquisition-date fair value of the 40 percent with a 10-year remaining life) that were underval unrecorded customer list (15-year remaining life) acquisition-date fair value was assigned to good nvestment in Stinson account and no goodwil ir payables or receivables. ntra-entity inventory sales between the two com

nc., Stinson's book value on that date consisted of co the acquisition-date fair value of the 40 percent with a 10-year remaining life) that were underval unrecorded customer list (15-year remaining life) acquisition-date fair value was assigned to good nvestment in Stinson account and no goodwil ir payables or receivables. ntra-entity inventory sales between the two com

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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