On January 1, 2014, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc.,

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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 $980,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $700,000, retained earnings of $250,000, and a noncontrolling interest fair value of $245,000. 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:

On January 1, 2014, Corgan Company acquired 80 percent of


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.
b. Prepare the worksheet adjustments for the December 31, 2015, consolidation of Corgan andSmashing.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Fundamentals of Advanced Accounting

ISBN: 978-0077862237

6th edition

Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik

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