Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $542,800 cash. Immediately...
80.2K
Verified Solution
Link Copied!
Question
Accounting
Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $542,800 cash. Immediately after the acquisition, the two companies have the following account balances. Clays equipment (with a five-year remaining life) is actually worth $501,300. Credit balances are indicated by parentheses.
Adams
Clay
Current assets
$
362,000
$
285,000
Investment in Clay
542,800
0
Equipment
705,300
444,000
Liabilities
(243,000
)
(251,000
)
Common stock
(350,000
)
(150,000
)
Retained earnings, 1/1/20
(1,017,100
)
(328,000
)
In 2020, Clay earns a net income of $59,700 and declares and pays a $5,000 cash dividend. In 2020, Adams reports net income from its own operations (exclusive of any income from Clay) of $144,000 and declares no dividends. At the end of 2021, selected account balances for the two companies are as follows:
Adams
Clay
Revenues
$
(404,000
)
$
(252,000
)
Expenses
292,900
189,000
Investment income
Not given
0
Retained earnings, 1/1/21
Not given
(382,700
)
Dividends declared
0
8,000
Common stock
(350,000
)
(150,000
)
Current assets
648,000
343,500
Investment in Clay
Not given
0
Equipment
598,800
480,600
Liabilities
(179,100
)
(204,500
)
What are the December 31, 2021, Investment Income and Investment in Clay account balances assuming Adams uses the:
Equity method.
Initial value method.
What is the amount of Consolidated Expenses in its December 31, 2021, consolidated income statement under each of the following methods?
What is the amount of Consolidated Equipment in its December 31, 2021, consolidated balance sheet under each of the following methods?
What is Adamss January 1, 2021, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the:
Equity value method.
Initial value method.
What worksheet adjustment to Adamss January 1, 2021, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method?
Prepare the worksheet entry to eliminate Clays stockholders equity.
What is consolidated net income for 2021?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
