18/5
estion ProForm acquired 80 percent of ClipRite on June 30, 2017, for $1,520,000 in cash. Based on ClipRite's acquisition-date fair value, an unrecorded intangible of $500,000 was recognized and is being amortized at the rate of $17,000 per year. No goodwill was recognized in the acquisition. The noncontrolling interest fair value was assessed at $380,000 at the acquisition date. The 2018 financial statements are as follows: 5 uts Sales Cost of goods sold Operating expenses Dividend income Net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 Cash and receivables Inventory Investment in ClipRite Fixed assets Accumulated depreciation Totals Liabilities Common stock Retained earnings, 12/31/18 Totals ProForm $(1,010,000) 640,000 310,000 (48,000) $ (108,000) $(3,000,000) (188,000) 310,000 $(2,798,000) 610,000 500,000 1,520,000 2,000,000 (200,000) $ 4,430,000 $ (832,000) (800,000) (2,798,000) $(4,430,000) ClipRite $(1,020,000) 505,000 205,000 $ (310,000) $(1,060,000) (310,000) 60,000 $(1,310,000) $ 510,000 910,000 @ 1,650,000 (200,000) $ 2,870,000 $ (760,000) (800,000) (1,310,000) $(2,870,000) ClipRite sold ProForm inventory costing $90,000 during the last six months of 2017 for $300,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $305,000 during 2018 for $460,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following: Answer is complete but not entirely correct. Consolidated Balance 8 $(1,310,000) 510,000 910,000 Retained earnings, 12/31/18 Cash and receivables Inventory Investment in ClipRite Fixed assets Accumulated depreciation Totals Liabilities Common stock Retained earnings, 12/31/18 Totals $(2,798,000) 610,000 500,000 1,520,000 2,000,000 (200,000) $ 4,430,000 $ (832,000) (800,000) (2,798,000) $(4,430,000) 1,650,000 (200,000) $ 2,870,000 (760,000) (800,000) (1,310,000) $(2,870,000) ClipRite sold ProForm inventory costing $90,000 during the last six months of 2017 for $300,000. At year-end, 30 percent remained. ClipRite sells ProForm inventory costing $305,000 during 2018 for $460,000. At year-end, 10 percent is left. With these facts, determine the consolidated balances for the following: Answer is complete but not entirely correct. Consolidated Balance Sales $ 1,570,000 Cost of goods sold $ 637,500 Operating expenses $ 532,000 Dividend income $ Net income attributable to noncontrolling interest $ 87,900 Inventory $ 1,394,500 Noncontrolling interest in subsidiary, 12/31/18 $ 6,789,664 On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,120,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $830,000, retained earnings of $380,000, and a noncontrolling interest fair value of $480,000. 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 2017 $280,000 2018 260,000 Dividends Declared $48,000 58,000 Inventory Purchases from Corgan $230,000 250,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018, 30 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, 2018. b. Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing. Answer is complete but not entirely correct. 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,
