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On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,330,000 in cash and

On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,330,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $890,000, retained earnings of $440,000, and a noncontrolling interest fair value of $570,000. 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:

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Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 30 percent of the current year purchases remain in Smashing's inventory.

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What are the correct values for these journal entries?

Net Income 2020 $340,000 2021 320,000 Dividends Declared $54,000 64,000 Inventory Purchases from Corgan $290,000 310,000 1 1 32,625 Equity in earnings of Smashing Cost of goods sold 3 32,625 2 2 890,000 744,625 Common stock - Smashing Retained earnings - Smashing Investment in Smashing Noncontrolling interest 1,144,238 490,388 3 3 541,500 Covenants Investment in Smashing Noncontrolling interest 379,050 162,450 4 4 169,715 Equity in earnings of Smashing Investment in Smashing > 169,715 X

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