On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...

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Accounting

On January 1, 2017, Corgan Company acquired 70 percent of theoutstanding voting stock of Smashing, Inc., for a total of $805,000in cash and other consideration. At the acquisition date, Smashinghad common stock of $740,000, retained earnings of $290,000, and anoncontrolling interest fair value of $345,000. Corgan attributedthe excess of fair value over Smashing's book value to variouscovenants with a 20-year remaining life. Corgan uses the equitymethod to account for its investment in Smashing.
During the next two years, Smashing reported the following:
2017 2018
Net Income $190,000 $170,000
Dividends Declared $39,000 $49,000
Inventory Purchases from Corgan $140,000 $160,000
Corgan sells inventory to Smashing using a 60 percent markup oncost. At the end of 2017 and 2018, 30 percent of the current yearpurchases remain in Smashing's inventory.
a.) Compute the equity method balance inCorgan's Investment in Smashing, Inc., account as of December 31,2018.
b.) Prepare the worksheet adjustments for theDecember 31, 2018, consolidation of Corgan and Smashing.

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The consolidated worksheet entries are prepared as below Transaction Consolidating Entries Debit Credit 1 Prepare Entry G 1 Investment in Smashing 15750 Cost of Goods Sold 15750 2 Prepare Entry S 2 Common StockSmashing 740000 Retained EarningsSmashing 290000 Investment in Smashing 685000 Non controlling Interest 345000 2 Prepare See Answer

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	2017	2018
Net Income	$190,000	$170,000
Dividends Declared	$39,000	$49,000
Inventory Purchases from Corgan	$140,000	$160,000