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

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

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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 $83,800 and an unrecorded customer list (15-year remaining life) assessed at a $59,700 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 Priceto Stinson Ending Balance(at transfer price) 2020…
On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $384,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $227,100. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $256,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $73,300 and an unrecorded customer list (15-year remaining life) assessed at a $49,500 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: Ending Balance (at transfer price) Transfer Price to Stinson $154,500 150,800 Year Cost to McIlroy…
On January 1, 2020, Mcllroy, Inc., acquired a 60 percent interest in the common stock of Stinson, Inc., for $420,000. Stinson's book value on that date consisted of common stock of $100,000 and retained earnings of $248,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $280,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $87,100 and an unrecorded customer list (15-year remaining life) assessed at a $63,000 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: Ending Balance (at transfer price) $57,500 37,600 Cost to Year McIlroy 2020 $138,000 2021 112,800 The…
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