Required: a. Compute the equity method balance in Corgan's Investment in Smashing, Incorporated, account as of December 31, 2024. b. Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing.
Required: a. Compute the equity method balance in Corgan's Investment in Smashing, Incorporated, account as of December 31, 2024. b. Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Hardev
Transcribed Image Text:On January 1, 2023, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Incorporated, for a total of
$910,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $770,000, retained earnings of
$320,000, and a noncontrolling interest fair value of $390,000. 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:
Items
2023
Net Income
$ 220,000
200,000
Dividends
Declared
$ 42,000
Inventory Purchases
from Corgan
52,000
$ 170,000
190,000
2024
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2023 and 2024, 30 percent of the current year
purchases remain in Smashing's inventory.
Required:
a. Compute the equity method balance in Corgan's Investment in Smashing, Incorporated, account as of December 31, 2024.
b. Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 7 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education