On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing,...
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On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total $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: Net Income 2020 $180,000 2021 160,000 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 2020 and 2021, 50 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, 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 $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: Net Income 2020 $180,000 2021 160,000 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 2020 and 2021, 50 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, 2021. b. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.
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a To compute the equity method balance in Corgans Investment in Smashing Inc account as of December 31 2021 we need to calculate the carrying value of ... View the full answer
Related Book For
Advanced Accounting
ISBN: 9781260247824
14th Edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
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