1.

On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,190,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $850,000, retained earnings of $400,000. The fair value of noncontrolling Interest is $510,000. 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: Dividends Net Income Declared 2020 $300,000 $50,000 2021 280,000 60,000 Inventory Purchases from Corgan $ 250,000 270,000 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. Hint: When you calculate the intra-entity gains that are to be deferred, notice that in this question the markup % is based on cost, not on sales. Answer is not complete. 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 $ 1,447,000 Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) view transaction list Consolidation Worksheet Entries Prepare entry *G Note: Enter debits before credits. Transaction Accounts Debit Credit 1 Record entry Clear entry view consolidation entries