On January 1, 2014, Corgan Company acquired 80 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 $700,000, retained earnings of $250,000, and a noncontrolling interest fair value of $245,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year life. Corgan uses the equity method to account for its investment in Smashing.
During the next two years, Smashing reported the following:
| Net Income |
Dividends |
Inventory Purchases from Corgan |
| 2014 |
$ |
150,000 |
|
$ |
35,000 |
|
$ |
100,000 |
|
| 2015 |
|
130,000 |
|
|
45,000 |
|
|
120,000 |
|