Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. on january 1, 2017, corgan company acquired 70 per

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

50.1K

Verified Solution

Question

Accounting

On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,120,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $830,000, retained earnings of $380,000, and a noncontrolling interest fair value of $480,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining life. Corgan uses the equity method to account for its investment in Smashing.

During the next two years, Smashing reported the following:

Net Income Dividends Declared Inventory Purchases from Corgan
2017 $ 280,000 $ 48,000 $ 230,000
2018 260,000 58,000 250,000

Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 30 percent of the current year purchases remain in Smashing's inventory.

  1. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018.
  2. Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students