Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $676,400 cash. Immediately after the acquisition, the two companies have the following account balances. Clayâs equipment (with a five-year remaining life) is actually worth $519,800. Credit balances are indicated by parentheses.
Adams Clay Current assets $ 422,000 $ 317,000 Investment in Clay 676,400 0 Equipment 697,800 470,000 Liabilities (259,000 ) (173,000 ) Common stock (350,000 ) (150,000 ) Retained earnings, 1/1/17 (1,187,200 ) (464,000 )
In 2017, Clay earns a net income of $78,900 and declares and pays a $5,000 cash dividend. In 2017, Adams reports net income from its own operations (exclusive of any income from Clay) of $162,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows:
Adams Clay Revenues $ (546,000 ) $ (252,000 ) Expenses 395,850 189,000 Investment income Not given 0 Retained earnings, 1/1/18 Not given (537,900 ) Dividends declared 0 8,000 Common stock (350,000 ) (150,000 ) Current assets 785,000 379,700 Investment in Clay Not given 0 Equipment 591,800 521,600 Liabilities (204,700 ) (117,200 )
What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the:
Equity method.
Initial value method.
How does the parentâs internal investment accounting method choice affect the amount reported for expenses in its December 31, 2018, consolidated income statement?
How does the parentâs internal investment accounting method choice affect the amount reported for equipment in its December 31, 2018, consolidated balance sheet?
What is Adamsâs January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the:
Equity value method.
Initial value method.
What worksheet adjustment to Adamsâs January 1, 2018, 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 Clayâs stockholdersâ equity.
What is consolidated net income for 2018?
Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $676,400 cash. Immediately after the acquisition, the two companies have the following account balances. Clayâs equipment (with a five-year remaining life) is actually worth $519,800. Credit balances are indicated by parentheses.
| Adams | Clay | |||||
| Current assets | $ | 422,000 | $ | 317,000 | ||
| Investment in Clay | 676,400 | 0 | ||||
| Equipment | 697,800 | 470,000 | ||||
| Liabilities | (259,000 | ) | (173,000 | ) | ||
| Common stock | (350,000 | ) | (150,000 | ) | ||
| Retained earnings, 1/1/17 | (1,187,200 | ) | (464,000 | ) | ||
In 2017, Clay earns a net income of $78,900 and declares and pays a $5,000 cash dividend. In 2017, Adams reports net income from its own operations (exclusive of any income from Clay) of $162,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows:
| Adams | Clay | |||||
| Revenues | $ | (546,000 | ) | $ | (252,000 | ) |
| Expenses | 395,850 | 189,000 | ||||
| Investment income | Not given | 0 | ||||
| Retained earnings, 1/1/18 | Not given | (537,900 | ) | |||
| Dividends declared | 0 | 8,000 | ||||
| Common stock | (350,000 | ) | (150,000 | ) | ||
| Current assets | 785,000 | 379,700 | ||||
| Investment in Clay | Not given | 0 | ||||
| Equipment | 591,800 | 521,600 | ||||
| Liabilities | (204,700 | ) | (117,200 | ) | ||
What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the:
Equity method.
Initial value method.
How does the parentâs internal investment accounting method choice affect the amount reported for expenses in its December 31, 2018, consolidated income statement?
How does the parentâs internal investment accounting method choice affect the amount reported for equipment in its December 31, 2018, consolidated balance sheet?
What is Adamsâs January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the:
Equity value method.
Initial value method.
What worksheet adjustment to Adamsâs January 1, 2018, 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 Clayâs stockholdersâ equity.
What is consolidated net income for 2018?
