Calculate the equity method balance


On January 1, 2010, Corgan Company acquired 80 percent of the oustanding 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 700,000 retained earnings of 250,000 and a noncontrolling interest fair value of 245,000. corgan attibuted the excess of fair value over smashing's book value to various covenants with a 20 year life. Corgan uses the equity method to accounts for its investment in smashing. during the next two years, smashing reported the following:

net income dividends inventory purchases from corgan
2010 150,000 35,000 100,000
2011 130,000 45,000 120,000

Corgan sells inventory to smashing using a 60 percent markup on cost. at the end of 2010 and 2011, 40 percent of the current year purchase remain in smashing's inventory.

a. compute the equity method balance in Corgan's investment in smashing, inc., account as of december 31, 2011.

b. prepare the worksheet adjustment for the december 31, 2011, consolidation of corgan and smashing.

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Accounting Basics: Calculate the equity method balance
Reference No:- TGS092578

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