On January 1, 2017, McIlroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $351,600. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $207,900. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $234,400. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $88,600 and an unrecorded customer list (15-year remaining life) assessed at a $64,500 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)
2017	$138,900	$173,625	$57,875
2018	113,400	151,200	37,800

The individual financial statements for these two companies as of December 31, 2018, and the year then ended follow:

	McIlroy, Inc.				Stinson, Inc.
Sales	$	(765,000	)		$	(406,000	)
Cost of goods sold		502,800				247,600
Operating expenses		203,285				84,200
Equity in earnings in Stinson		(38,749	)			0
Net income	$	(97,664	)		$	(74,200	)
Retained earnings, 1/1/18	$	(850,200	)		$	(286,600	)
Net income		(97,664	)			(74,200	)
Dividends declared		52,000				21,500
Retained earnings, 12/31/18	$	(895,864	)		$	(339,300	)
Cash and receivables	$	304,600			$	154,500
Inventory		286,200				134,500
Investment in Stinson		405,198				0
Buildings (net)		377,000				208,800
Equipment (net)		269,000				92,300
Patents (net)		0				27,300
Total assets	$	1,641,998			$	617,400
Liabilities	$	(446,134	)		$	(178,100	)
Common stock		(300,000	)			(100,000	)
Retained earnings, 12/31/18		(895,864	)			(339,300	)
Total liabilities and equities	$	(1,641,998	)		$	(617,400	)

Show how McIlroy determined the $405,198 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinsons income.

Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018.

Show how McIlroy determined the $405,198 Investment in Stinson account balance. Assume that McIlroy defers 100 percent of downstream intra-entity profits against its share of Stinsons income.

	Consideration transferred $351,600 Increase in Stinsons retained earnings 1/1/17 to 1/1/18 Excess fair value amortization 2017 ending inventory profit deferral 0 McIlroys equity in earnings of Stinson for 2018 Stinson 2018 dividends declared to McIlroy Investment account balance 12/31/18 $351,600

repare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2018. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the NCI and Consolidated Totals columns should be entered with a minus sign.)

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MCILROY, INC., AND STINSON, INC. Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Accounts McIlroy Stinson Debit Credit NCI Consolidated Totals Sales $(765,000) $(406,000) Cost of goods sold 502,800 247,600 Operating expenses 203,285 84,200 Equity in earnings of Stinson (38,749) 0 Separate company net income (97,664) (74,200) Consolidated net income $0 To noncontrolling interest To McIlroy, Inc. 0 Retained earnings, 1/1 (850,200) (286,600) Net income (97,664) (74,200) Dividends declared 52,000 21,500 Retained earnings, 12/31 $(895,864) $(339,300) $0 Cash and receivables $304,600 $154,500 Inventory 286,200 134,500 Investment in Stinson 405,198 0 Buildings (net) 377,000 208,800 Equipment (net) 269,000 92,300 Patents (net) 0 27,300 Customer list Goodwill Total assets $1,641,998 $617,400 $0 Liabilities (446,134) (178,100) Common stock (300,000) (100,000) Noncontrolling interest 1/1 Noncontrolling interest 12/31 Retained earnings, 12/31 (895,864) (339,300) Total liabilities and equities $(1,641,998) $(617,400) $0 $0 $0