Problem $5-13($Static$)($LO $5-3,5-4,5-5)$

On January $1,2023,$ Corgan Company acquired $80$ percent of the outstanding voting

stock of Smashing, Incorporated, 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:

Corgan sells inventory to Smashing using a $60$ percent markup on cost$.$ At the end of

$2023$ and $2024,40$ 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.