Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $663,000 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 $611,300. Credit balances are indicated by parentheses. Adams clay 408,000 663,000 822, 300 (211,000) (350,000) 259,000 ets Investnent in Clay Equipment Liabilities Common stock Retained earnings, 1/1/17 554,000 (225,000) (150,000) (438,000 } (1,332,300) In 2017, Clay earns a net income of $50,700 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 $189,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows: Adams clay 572, 000) 414,700 $( 382, 000) Expenses Investnent income Retained earnings, 1/1/18 Dividends declared Common stock 286,500 (483,700) (150,000) Not given Not given 8, 000 (350,000) 712,000 305,200 ets Investnent in Clay Equipment Liabilities Not given 25,800 (140,700) 610,400 (192 ,000) a. What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the . Equity method. Initial value method. b. How does the parent's internal investment accounting method choice affect the amount reported for expenses in its December 31, c. How does the parent's internal investment accounting method choice affect the amount reported for equipment in its December 31, d. What is Adams's January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the 2018, consolidated income statement? 2018, consolidated balance sheet? Equity value method. Initial value method. e 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? Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $663,000 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 $611,300. Credit balances are indicated by parentheses. Adams clay 408,000 663,000 822, 300 (211,000) (350,000) 259,000 ets Investnent in Clay Equipment Liabilities Common stock Retained earnings, 1/1/17 554,000 (225,000) (150,000) (438,000 } (1,332,300) In 2017, Clay earns a net income of $50,700 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 $189,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows: Adams clay 572, 000) 414,700 $( 382, 000) Expenses Investnent income Retained earnings, 1/1/18 Dividends declared Common stock 286,500 (483,700) (150,000) Not given Not given 8, 000 (350,000) 712,000 305,200 ets Investnent in Clay Equipment Liabilities Not given 25,800 (140,700) 610,400 (192 ,000) a. What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the . Equity method. Initial value method. b. How does the parent's internal investment accounting method choice affect the amount reported for expenses in its December 31, c. How does the parent's internal investment accounting method choice affect the amount reported for equipment in its December 31, d. What is Adams's January 1, 2018, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the 2018, consolidated income statement? 2018, consolidated balance sheet? Equity value method. Initial value method. e 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
