5. On January 1, 2023, 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 remaining life. Corgan uses the equity method to account for its investment in Smashing. During the next two years, Smashing reported the following: 2023 2024 Net Income $150,000 130,000 Dividends Declared $35,000 45,000 Inventory Purchases from Corgan $100,000 120,000 Page 251 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. a. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2024. b. Prepare the worksheet adjustments for the December 31, 2024, consolidation of Corgan and Smashing.

On January 1, 2020, Doone Corporation acquired 60 percent of the outstanding voting stock of Rockne Company for $300,000 consideration. At the acquisition date, the fair value of the 40 percent noncontrolling interest was $200,000, and Rockne's assets and liabilities had a collective net fair value of $500,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $160,000 in 2021. Since being acquired, Rockne has regularly supplied inventory to Doone at 25 percent more than cost. Sales to Doone amounted to $250,000 in 2020 and $300,000 in 2021. Approximately 30 percent of the inventory purchased during any one year is not used until the following year. a) What is the non controlling interest's share of Rockne's 2021 income? b) Prepare Doone's 2021 consolidation entries required by the intra-entity inventory transfers.

On January 1, 2024, Cameron Incorporated bought 30% of the outstanding common stock of Lake Construction Company for $330 million cash, giving Cameron the ability to exercise significant influence over Lake’s operations. At the date of acquisition of the stock, Lake's net assets had a fair value of $700 million. Its book value was $600 million. The difference was attributable to the fair value of Lake's buildings and its land exceeding book value, each accounting for one-half of the difference. Lake’s net income for the year ended December 31, 2024, was $110 million. During 2024, Lake declared and paid cash dividends of $20 million. The buildings have a remaining life of 5 years. Required: Complete the table below and prepare all appropriate journal entries related to the investment during 2024, assuming Cameron accounts for this investment by the equity method. Determine the amounts to be reported by Cameron. 1 Record the investment in Lake Construction shares. 2 Record the…

On January 1, 2020, Corgan Company acquired 80 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,560,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $900,000, retained earnings of $450,000, 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:     Net Income Dividends Declared Inventory Purchases from Corgan 2020 $350,000 $ 55,000 $ 300,000             2021 330,000 $ 65,000 $ 320,000                 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2020 and 2021, 40 percent of the current year purchases remain in Smashing's inventory.   Compute the equity method balance in Corgan's Investment in Smashing, Inc., account…