On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $980,000 incash and other consideration. At the acquisition date, Smashing had common stock of $790,000, retained earnings of $340,000, and anoncontrolling interest fair value of $420,000. Corgan attributed the excess of fair value over Smashing's book value to variouscovenants 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:InventoryDividends Purchases fromNet IncomeDeclaredCorgan$190,000210, 000$240, 000$44,00054,00020202021220,000Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 50 percent of the current yearpurchases remain in Smashing's inventory.a. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2021.b. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.Complete this question by entering your answers in the tabs below.Required ARequired BCompute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2021.Investment balance 12/31/21Required ARequired B > Complete this question by entering your answers in the tabs below.Required ARequired BPrepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing. (If no entry is required for atransaction/event, select "No journal entry required" in the first account field.)view transaction list:X:1 Prepare entry *G>2 Prepare entry S3 Prepare entry A4 Prepare entry I5 Prepare entry DCredit6 Prepare Entry E7 Prepare entry TI8 Prepare entry GNote := journal entry has been enteredRecord entryClear entryview consolidation entries

Equity method balance According to the equity method, the investing company must record the…

On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting cash and other consideration. At the acquisition date, Smashing had common stock o noncontrolling interest fair value of $420,000. Corgan attributed the excess of fair va covenants with a 20-year remaining life. Corgan uses the equity method to account f During the next two years, Smashing reported the following: Inventory Dividends Purchases from Declared $44,000 Net Income Corgan $190,000 2020 $240,000 2021 220, 000 54,000 210,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end o purchases remain in Smashing's inventory.

On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting cash and other consideration. At the acquisition date, Smashing had common stock o noncontrolling interest fair value of $420,000. Corgan attributed the excess of fair va covenants with a 20-year remaining life. Corgan uses the equity method to account f During the next two years, Smashing reported the following: Inventory Dividends Purchases from Declared $44,000 Net Income Corgan $190,000 2020 $240,000 2021 220, 000 54,000 210,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end o purchases remain in Smashing's inventory.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

On January 1, 2020, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $980,000 in
cash and other consideration. At the acquisition date, Smashing had common stock of $790,000, retained earnings of $340,000, and a
noncontrolling interest fair value of $420,000. 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
Dividends Purchases from
Net Income
Declared
Corgan
$190,000
210, 000
$240, 000
$44,000
54,000
2020
2021
220,000
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 50 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, 2021.
b. Prepare the worksheet adjustments for the December 31, 2021, consolidation of Corgan and Smashing.
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, 2021.
Investment balance 12/31/21
Required A
Required B >

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