On January 1, 2020, McIlroy, 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, 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:
Year Cost to McIlroy Transfer Price
to Stinson Ending Balance
(at transfer price)
2020 $134,700 $168,375 $56,125
2021 112,500 150,000 37,500
The individual financial statements for these two companies as of December 31, 2021, and the year then ended follow:
McIlroy, Inc. Stinson, Inc.
Sales $ (750,000 ) $ (388,000 )
Cost of goods sold 492,900 236,800
Operating expenses 200,810 80,600
Equity in earnings in Stinson (36,734 ) 0
Net income $ (93,024 ) $ (70,600 )
Retained earnings, 1/1/21 $ (818,600 ) $ (285,000 )
Net income (93,024 ) (70,600 )
Dividends declared 50,200 20,200
Retained earnings, 12/31/21 $ (861,424 ) $ (335,400 )
Cash and receivables $ 293,300 $ 152,700
Inventory 275,500 133,000
Investment in Stinson 404,613 0
Buildings (net) 358,000 207,600
Equipment (net) 255,400 91,000
Patents (net) 0 25,800
Total assets $ 1,586,813 $ 610,100
Liabilities $ (425,389 ) $ (174,700 )
Common stock (300,000 ) (100,000 )
Retained earnings, 12/31/21 (861,424 ) (335,400 )
Total liabilities and equities $ (1,586,813 ) $ (610,100 )
(Note: Parentheses indicate a credit balance.)
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.
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2021.
- On January 1 2020 Mcilroy Inc Acquired A 60 Percent Interest In The Common Stock Of Stinson Inc For 352 800 St 1 (38.53 KiB) Viewed 61 times
- On January 1 2020 Mcilroy Inc Acquired A 60 Percent Interest In The Common Stock Of Stinson Inc For 352 800 St 2 (32.31 KiB) Viewed 61 times
- On January 1 2020 Mcilroy Inc Acquired A 60 Percent Interest In The Common Stock Of Stinson Inc For 352 800 St 3 (67.38 KiB) Viewed 61 times
Return to question 2 Answer is not complete. Complete this question by entering your answers in the tabs below. ts Required A Required B Show how Mcllroy determined the $404,613 Investment in Stinson account balance. Assume that Mcllroy defers 100 percent of downstream intra-entity profits against its share of Stinson's income. (Around to be deducted should be indicated with a minus sign.) 3 352 800 Consideration transferred Increase in Stinson's retained earings 1/1/20 to 1/1/21 Excess fair value amortization 2020 ending inventory profit deferral Mcllroy's equity in earnings of Stinson for 2021 Stinson 2021 dividends declared to Mcllroy Investment account balance 12/31/21 OOOOOOO $ 45.900 17,476) (11.225 OOO 27.199 36.734 112,120) 404,613 ( TA. Required >
2 Accounts NCI Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Mcllroy Stinson Debit Credit (750,000) S (388,000) $ 150.000 492.900 236.800 200.810 80.600 12.460 (36,734) 0 36,734 (93.024) (70.600) Consolidated Totals $ (988,000) 293.870 285,000 12.120 8.080 (818.600) (93 024) 50,200 (861.424) 446.000 OOOOO 5 s $ s s $ 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 1/121 Net income Dividends declared Retained earnings 12/31/21 Cash and receivables Inventory Investment in Stinson Buildings (net) Equipment (net) Patents (net) Customer list Goodwin Total assets Liabilities Common stock Noncontrolling Interest 1/1/21 Noncontrolling interest 12/31/21 Retained earnings 12/31/21 Total liabilities and equities (618.600) (93,024) 50.200 (061424) 293 300 275,500 404,613 358,000 255,400 0 (205.000) (70.600) 20,200 (335.400) 152,700 133.000 0 207,600 91,000 25,800 565,600 346.400 8,440 4,020 134,800 $ $ lo 1.586,813 (425.389) (300,000) 610.100 (174,700) (100,000) (600.089) 300,000) 100.000 (861,424) (861,424) $ (1.586 813) (335,400) (610.100) 5 S 718 994 $ 24.580 Required A