PART B:

On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc, for a total of $1,225,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $860,000, retained earnings of $410,000, and a noncontrolling interest fair value of $525,000. 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: Inventory Purchases Dividends Net IncomeDeclared from Corgan $51,000 61,000 2017 $310,000 2018 290,000 $260,000 280,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 201830 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 Complete this question by entering your answers in the tabs below. Required ARequired B Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018. Investment balance s 140,500 12/31/18 Required A Required B Investment in Smashing Cost of goods sold 29,250 29,250 860,000 287,000 2 2 Common stock - Smashing Retained earnings - Smashing Investment in Smashing Noncontrolling interest 521,500 625,500 Covenants 456,000 Investment in Smashing Noncontrolling interest 319,200 136,800 4 4 Equity in earnings of Smashing 161,200 Investment in Smashing 161,200 Investment in Smashing 42,700 Dividends declared 42,700 Amortization expense 24,000 Covenants 24,000 Sales 280,000 Cost of goods sold 280,000 Cost of goods sold 31,500 Inventory 31,500