Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $695,600 cash. Immediately after the acquisition, the two companies have the following account balances. Clay's equipment (with a five-year remaining life) is actually worth $642,300. Credit balances are indicated by parentheses. Clay $ 223,000 Current assets Investment in Clay Equipment Liabilities Common stock Retained earnings, 1/1/17 Adams 400,000 695,600 872,300 (230,000) (350,000) (1,387,900) 576,000 (177,000) (150,000) (472,000) In 2017, Clay earns a net income of $76,500 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 $146,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows: Adams $ (400,000) 290,000 Not given Not given Clay $ (380,000) 285,000 Revenues Expenses Investment income Retained earnings, 1/1/18 Dividends declared Common stock Current assets Investment in Clay Equipment Liabilities (543,500) 8,000 (150,000) 277,900 (350,000) 681,000 Not given 756,300 (166,700) 610,800 (123,600) a. What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the: Equity method. Initial value method. U b. How does the parent's internal investment accounting method choice affect the amount reported for expenses in its December 31, 2018, consolidated income statement? c. How does the parent's internal investment accounting method choice affect the amount reported for equipment in its December 31, 2018, consolidated balance sheet? d. What is Adams's January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the: Equity value method. Initial value method. e. What worksheet adjustment to Adams's January 1, 2018, Retained Earnings account balance is required if Adams accounts fo its investment in Clay using the initial value method? f. Prepare the worksheet entry to eliminate Clay's stockholders' equity. g. What is consolidated net income for 2018? its investment in Clay using the initial value method? f. Prepare the worksheet entry to eliminate Clay's stockholders' equity. g. What is consolidated net income for 2018? X Answer is not complete. Complete this question by entering your answers in the tabs below. Req A Req B to D Req E and F Reg G What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the: Equity method Initial value method Investment Income $ 63,240 $ 8,000 Investment in Clay $ 814,080 % $ 695,600 Reg A Req B to D > UUUUUUUUUUUUUUUUUUUUUUUU Req A Req B to D Reg E and F Req G ---------- b. How does the parent's internal investment accounting method choice affect the amount reported for expenses in its December 31, 2018, consolidated income statement? c. How does the parent's internal investment accounting method choice affect the amount reported for equipment in its December 31, 2018, consolidated balance sheet? d. What is Adams's January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the: Equity value method. Initial value method. Show less A C. b. Consolidated Expense $ 588,260 d. Retained Consolidated Equipment Earnings $ 1,438,600 X $ 1,597,140 $ 1,465,120 X $ 158,900 X Equity method Initial value method Partial equity method Complete this question by entering your answers in the tabs below. Reg A Req B to D Req E and F Req G e. What worksheet adjustment to Adams's January 1, 2018, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method? f. Prepare the worksheet entry to eliminate Clay's stockholders' equity. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Show less A No Date Accounts Credit Debit 58,240 1 January 01, 2018 Investment in Clay Retained earnings, 1/1/18 (Clay) 58,240 Initial value method. e. What worksheet adjustment to Adams's January 1, 2018, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method? f. Prepare the worksheet entry to eliminate Clay's stockholders' equity. g. What is consolidated net income for 2018? Answer is not complete. Complete this question by entering your answers in the tabs below. Req A Req B to D Req E and F Req G What is consolidated net income for 2018? Consolidated net income $ 1,368,260
