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The equity method to account for its investment in smashing

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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  

Reference no: EM131792367

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