Question
On January 1, 2014, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,435,000 in cash and
On January 1, 2014, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,435,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $920,000, retained earnings of $470,000, and a noncontrolling interest fair value of $615,000. Corgan attributed the excess of fair value over Smashings book value to various covenants with a 20-year 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 2014 and 2015, 30 percent of the current year purchases remain in Smashings inventory. |
a. | Compute the equity method balance in Corgans Investment in Smashing, Inc., account as of December 31, 2015. |
b. | Prepare the worksheet adjustments for the December 31, 2015, consolidation of Corgan and Smashing. Need the following entries G, S, A, I, D,E,TI,G |
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