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On January 1, 2023, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing. Incorporated, for a total of $880,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $730,000, retained earnings of $280,000, and a noncontrolling Interest fair value of $220,000. 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: Items 2823 2824 Net Incone $188,000 168,000 Dividends Declared $ 38,000 48,000 Inventory Purchases from Corgan $130,000 150,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2023 and 2024, 50 percent of the current year purchases remain in Smashing's inventory.

On January 1, 2023, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing. Incorporated, for a total of $880,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $730,000, retained earnings of $280,000, and a noncontrolling Interest fair value of $220,000. 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: Items 2823 2824 Net Incone $188,000 168,000 Dividends Declared $ 38,000 48,000 Inventory Purchases from Corgan $130,000 150,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2023 and 2024, 50 percent of the current year purchases remain in Smashing's inventory.

Intermediate Accounting: Reporting And Analysis
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
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On January 1, 2023, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Incorporated, for a total of $880,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $730,000, retained earnings of $280,000, and a noncontrolling Interest fair value of $220,000. 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: Itens 2823 2824 Net Incone $188,008 168,000 Dividends Declared $ 38,000 48,000 Inventory Purchases from Corgan $130,000 150,000 Corgan sells Inventory to Smashing using a 60 percent markup on cost. At the end of 2023 and 2024, 50 percent of the current year purchases remain in Smashing's inventory. Required: a. Compute the equity method balance in Corgan's Investment in Smashing, Incorporated, account as of December 31, 2024. b. Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. No Transaction Accounts 1 G Investment in Smashing Cost of goods sold 2 S Common stock - Smashing 3 A 4 5 D B E 7 T B G Retained eamings-Smashing Investment in Smashing Noncontrolling interest Covenants Investment in Smashing Noncontroling interest Equity in earnings of Smashing Investment in Smashing Investment in Smashing Dividends declared Amortization expense Covenants Sales Cost of goods sold Cost of goods sold Inventory <Required A 0000 000 00 00 00 Dabit 24,375 Credit 24,375 730,000 422,000 921,600 230,400 00 00 85,500 68,400 17,100 118,500 118,500 38.400 C 38,400 4,500 4,500 150,000 150,000 46,675 45,875 C
Transcribed Image Text:On January 1, 2023, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Incorporated, for a total of $880,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $730,000, retained earnings of $280,000, and a noncontrolling Interest fair value of $220,000. 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: Itens 2823 2824 Net Incone $188,008 168,000 Dividends Declared $ 38,000 48,000 Inventory Purchases from Corgan $130,000 150,000 Corgan sells Inventory to Smashing using a 60 percent markup on cost. At the end of 2023 and 2024, 50 percent of the current year purchases remain in Smashing's inventory. Required: a. Compute the equity method balance in Corgan's Investment in Smashing, Incorporated, account as of December 31, 2024. b. Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing. Note: If no entry is required for a transaction/event, select "No journal entry required in the first account field. No Transaction Accounts 1 G Investment in Smashing Cost of goods sold 2 S Common stock - Smashing 3 A 4 5 D B E 7 T B G Retained eamings-Smashing Investment in Smashing Noncontrolling interest Covenants Investment in Smashing Noncontroling interest Equity in earnings of Smashing Investment in Smashing Investment in Smashing Dividends declared Amortization expense Covenants Sales Cost of goods sold Cost of goods sold Inventory <Required A 0000 000 00 00 00 Dabit 24,375 Credit 24,375 730,000 422,000 921,600 230,400 00 00 85,500 68,400 17,100 118,500 118,500 38.400 C 38,400 4,500 4,500 150,000 150,000 46,675 45,875 C
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