Question
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
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) | ||||
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What are the December 31, 2021, Investment Income and Investment in Clay account balances assuming Adams uses the:
- Equity method.
- Initial value method.
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What is the amount of Consolidated Expenses in its December 31, 2021, consolidated income statement under each of the following methods?
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What is the amount of Consolidated Equipment in its December 31, 2021, consolidated balance sheet under each of the following methods?
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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.
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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?
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Prepare the worksheet entry to eliminate Clays stockholders equity.
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What is consolidated net income for 2021?
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