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On January 1,2023, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing,...

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Accounting

On January 1,2023, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Incorporated, for a total of $840,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $750,000, retained earnings of $300,000, and a noncontrolling interest fair value of $360,000. 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 Net Income Dividends Declared Inventory Purchases from Corgan
2023 $ 200,000 $ 40,000 $ 150,000
2024180,00050,000170,000
Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2023 and 2024,40 percent of the current year purchases remain in Smashing's inventory.
Required:
Compute the equity method balance in Corgan's Investment in Smashing, Incorporated, account as of December 31,2024.
Prepare the worksheet adjustments for the December 31,2024, consolidation of Corgan and Smashing.

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