Chapter 5 problems - 17. On January 1, 2010, Corgan Company...

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17. 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. 19. On January 1, 2010, done 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
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account for its investment in Rockne. Rockne reports net income of 160,000 in 2011. Since being acquired, Rockne has regularly supplied inventory to Doone at 25% more than cost. Sales to Doone amounted to 250,000 in 2010 and 300,000 in 2011. Approximately, 30% of the inventory purchased during any one year is not used until the following year: a. What is the noncontrolling interest’s share of rockne’s 2011 income? b. Prepare Doone’s 2011 consolidated entries required by the intra entity inventory transfers? 21. Akron, Inc., owns all outstanding stock of Toledo corporation. Amortization expense of
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This note was uploaded on 05/28/2010 for the course ACCOUNTING AC5730 taught by Professor Dan during the Summer '10 term at New England College.

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Chapter 5 problems - 17. On January 1, 2010, Corgan Company...

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