Reference no: EM131268103
On January 1, 2014, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,680,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $930,000, retained earnings of $480,000, and a noncontrolling interest fair value of $420,000. Corgan attributed the excess of fair value over Smashing’s book value to various covenants with a 20-year 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 Inventory Purchases from Corgan
2014 380,000 58,000 330,000
2015 360,000 68,000 350,000
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2014 and 2015, 40 percent of the current year purchases remain in Smashing’s inventory.
a. Compute the equity method balance in Corgan’s Investment in Smashing, Inc., account as of December 31, 2015.
investment balance 12/31/15:
b. Prepare the worksheet adjustments for the December 31, 2015, consolidation of Corgan and Smashing. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
transaction consolidating entries debit credit
1. Prepare entry *G
2. Prepare entry S
3. Prepare entry A
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: On January 1, 2014, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,680,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $930,000, retained earnings of ..
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