On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,080,000 In cash and other consideratlon. At the acquisition date, Smashing had common stock of $780,000, retalned earnings of $330,000, and a noncontrolling Interest falr value of $270,000. Corgan attributed the excess of falr value over Smashing's book value to varlous covenants with a 20-year remalning life. Corgan uses the equity method to account for Its Investment in Smashing. During the next two years, Smashing reported the following: Inventory Dividends Purchases from Corgan $180, e0e 200, eee Net Income Declared $43,e00 $230, e00 210, e00 2020 2021 53,000 Corgan sells Inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 40 percent of the current year purchases remaln in Smashing's Inventory. a. Compute the equity method balance In Corgan's Investment In Smashing, Inc., account as of December 31, 2021. b. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.
On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,080,000 In cash and other consideratlon. At the acquisition date, Smashing had common stock of $780,000, retalned earnings of $330,000, and a noncontrolling Interest falr value of $270,000. Corgan attributed the excess of falr value over Smashing's book value to varlous covenants with a 20-year remalning life. Corgan uses the equity method to account for Its Investment in Smashing. During the next two years, Smashing reported the following: Inventory Dividends Purchases from Corgan $180, e0e 200, eee Net Income Declared $43,e00 $230, e00 210, e00 2020 2021 53,000 Corgan sells Inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 40 percent of the current year purchases remaln in Smashing's Inventory. a. Compute the equity method balance In Corgan's Investment In Smashing, Inc., account as of December 31, 2021. b. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.
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
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
Related questions
Question
Transcribed Image Text:On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,080,000
In cash and other consideration. At the acquisition date, Smashing had common stock of $780,000, retalned earnings of $330,000,
and a noncontrolling Interest falr value of $270,000. Corgan attributed the excess of fair value over Smashing's book value to varlous
covenants with a 20-year remalning life. Corgan uses the equity method to account for Its Investment in Smashing.
During the next two years, Smashing reported the following:
Inventory
Purchases from
Dividends
Net Income
Declared
$43,eee
53,e00
Corgan
$180,000
200, 000
2020
$230,000
210,000
2021
Corgan sells Inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 40 percent of the current year
purchases remaln in Smashing's Inventory.
a. Compute the equity method balance in Corgan's Investment in Smashing, Ic., account as of December 31, 2021.
b. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2021.
Investment balance 12/31/21
1,193,000
< Required A
Required B >
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning