Problem $5-32($Algo$)($LO $5-2,5-3,5-4,5-5)$

On January $1,2020,$ McIlroy, Inc., acquired a $60$ percent interest in the common stock of Stinson, Inc., for $$384,600.$ Stinson's book value on that date consisted of common stock of $$100,000$ and retained earnings of $$227,300.$ Also, the acquisition$-$date fair value of the $40$ percent noncontrolling interest was $$256,400.$ The subsidiary held patents $($with a $10-$year remaining life$)$ that were undervalued within the company's accounting records by $$77,800$ and an unrecorded customer list $(15-$year remaining life$)$ assessed at a $$53,700$ 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$)$

$2020$ $$126,900$ $$158,625$ $$52,875$

$2021113,100150,80037,700$

The individual financial statements for these two companies as of December $31,2021,$ and the year then ended follow:

McIlroy, Inc. Stinson, Inc.

Sales $ $(730,000)$ $ $(366,000)$

Cost of goods sold $479,800223,600$

Operating expenses $196,51076,200$

Equity in earnings in Stinson $(34,054)0$

Net income $ $(87,744)$ $ $(66,200)$

Retained earnings, $1/1/21$ $ $(771,200)$ $ $(282,600)$

Net income $(87,744)(66,200)$

Dividends declared $47,70018,300$

Retained earnings, $12/31/21$ $ $(811,244)$ $ $(330,500)$

Cash and receivables $ $276,200$ $ $150,500$

Inventory $259,400131,200$

Investment in Stinson $423,4630$

Buildings $($net$)337,000205,000$

Equipment $($net$)240,60088,800$

Patents $($net$)023,200$

Total assets $ $1,536,663$ $ $598,700$

Liabilities $ $(425,419)$ $ $(168,200)$

Common stock $(300,000)(100,000)$

Retained earnings, $12/31/21(811,244)(330,500)$

Total liabilities and equities $ $(1,536,663)$ $ $(598,700)$

$($Note: Parentheses indicate a credit balance.$)$

Show how McIlroy determined the $$423,463$ Investment in Stinson account balance. Assume that McIlroy defers $100$ percent of downstream intra$-$entity profits against its share of Stinson$$s income.

Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December $31,2021.$b$.$ Prepare a consolidated worksheet to determine approprlate balances for external financlal reporting as of December $31,2021.$

Answer is not complete.

Complete this question by entering your answers in the tabs below.

Required A

Required B

Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December $31,2021.($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. Input all amounts as positive values.$)$

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$\backslash$table$[[$MCILROY$,$ INC., AND STINSON, INC.$],[$Consolidation Worksheet$],[$For Year Ending December $31,2021],[,$Mellroy,Stinson,Consolidation Entries,$NCl,\backslash$table$[[$Consolidated$],[$Totals$]]],[$Accounts$,,$Debit,Credit$],[$Sales$,$$$,(730,000),$$$,(386,000),$$$,150,800,,,$$$,(845,200)$