Adams, Inc , acquires Clay Corporation on January 1, 2017, in exchange for $580,700 cash Immediately after the acquisition, the two companies have the following account balances Clays equipment (with a five year remaining life) is actually worth $518,700 Credit balances are indicated by parentheses Adams Clay Current Assets $310,000 $222,000 Investment in Clay 580,700 0 Equipment 739,700 456,000 Liabilities (265,000) (163,000) Common Stock (350,000) (150,000) Retained Earnings, 1 1 17 (1,015,400) (365,000) In 2017, Clay earns a net income of $62,400 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 $173,000 and declares no dividends At the end of 2018, selected account balances for the two companies are as follows Adams Clay Revenues $(512,000) $(318,000) Expenses 371,200 238,500 Investment Income Not given 0 Retained earnings, 1 1 17 Not given (422,400) Dividends declared 0 8,000 Common Stock (350,000) (150,000) Current assets 654,000 275,100 Investment in Clay Not given 0 Equipment 634,700 492,300 Liabilities (198,100) (125,800) a 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 Investment in Clay Equity Method Initial value method b What is the amount of Consolidated Equipment in its December 31, 2018, consolidated balance sheet under each of the following methods Consolidated Equipment Equity method Initial value method c What worksheet adjustment to Adamss January 1, 2018, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method No Date Accounts Debit Credit 1 January 01, 2018 Investment in Clay Retained earnings, 1 1 18 (Adam) d Prepare the worksheet entry to eliminate Clays stockholders equity No Date Accounts Debit Credit 2 December 31, 2018 Retained earnings, 1 1 18 Common stock (clay) Investment in Clay

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Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $580,700 cash. Immediately after the acquisition, the two companies have the following account

Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $580,700 cash. Immediately after the acquisition, the two companies have the following account balances. Clays equipment (with a five-year remaining life) is actually worth $518,700. Credit balances are indicated by parentheses.

	Adams	Clay
Current Assets	$310,000	$222,000
Investment in Clay	580,700	0
Equipment	739,700	456,000
Liabilities	(265,000)	(163,000)
Common Stock	(350,000)	(150,000)
Retained Earnings, 1/1/17	(1,015,400)	(365,000)

In 2017, Clay earns a net income of $62,400 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 $173,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows:

	Adams	Clay
Revenues	$(512,000)	$(318,000)
Expenses	371,200	238,500
Investment Income	Not given	0
Retained earnings, 1/1/17	Not given	(422,400)
Dividends declared	0	8,000
Common Stock	(350,000)	(150,000)
Current assets	654,000	275,100
Investment in Clay	Not given	0
Equipment	634,700	492,300
Liabilities	(198,100)	(125,800)

a. 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	Investment in Clay
Equity Method
Initial value method

b. What is the amount of Consolidated Equipment in its December 31, 2018, consolidated balance sheet under each of the following methods?

	Consolidated Equipment
Equity method
Initial value method

c. What worksheet adjustment to Adamss January 1, 2018, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method?