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Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing. On January 1, 2017, Corgan Company acquired 70 percent of the
Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing.
On January 1, 2017, 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: Dividends Declared $54,000 64,000 Net Income $340,000 320,000 Inventory Purchases from Corgan $ 290,000 310,000 2017 2018 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. No Transaction Accounts Credit Debit 32,625 1 1 Investment in Smashing Cost of goods sold 32,625 2 N 890,000 744,625 X Common stock - Smashing Retained earnings - Smashing Investment in Smashing Noncontrolling interest 1,144,238 490,388 3 541,500 Covenants Investment in Smashing Noncontrolling interest 379,050 162,450 4 4 169,175 Equity in earnings of Smashing Investment in Smashing 169,175 x 01 44,800 Investment in Smashing Dividends declared 44,800 6 6 28,500 Amortization expense Covenants 28,500 7 310,000 Sales Cost of goods sold 310,000 8 8 34,875 Cost of goods sold Inventory 34,875Step by Step Solution
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