Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $514,400 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 $463,800. Credit balances are indicated by parentheses. Clay 250.000 $ Current assets Investment in Clay Equipment Liabilities Common stock Retained earnings: 1/1/20 Adams 372, 000 514, 400 700, 800 (229,000) (350,000) (1,008, 200) 396, 000 (209,000 (150,000 (287, 000) In 2020, Clay earns a net income of $78,900 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 $126,000 and declares no dividends. At the end of 2021, selected account balances for the two companies are as follows: Revenues $ Expenses Investment income Retained earnings, 1/1/21 Dividends declared Common stock Current assets Investment in Clay Equipment Liabilities Adams (550, 000) 398,750 Not given Not given 0 (350,000 717,000 Not given 606, 300 (172,300) Clay $ (340,000 255,000 0 (360, 900 8,000 (150,000 298, 600 0 449, 100 (159, 200) a. What are the December 31, 2021, Investment Income and Investment in Clay account balances assuming Adams uses the: Equity method. Initial value method. b. What is the amount of Consolidated Expenses in its December 31, 2021, consolidated income statement under each of the following methods? c. What is the amount of Consolidated Equipment in its December 31, 2021, consolidated balance sheet under each of the following methods? d. What is Adams's January 1, 2021, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the: Equity value method. Initial value method. What worksheet adjustment to Adams's January 1, 2021, 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 2021? Req A Reg B to D Req E and F ReqG What are the December 31, 2021, Investment Income and Investment in Clay account balances assuming Adams uses the: Investment Income Investment in Clay Equity method Initial value method ReqA Req B to D Req E and F Reg G b. What is the amount of Consolidated Expenses in its December 31, 2021, consolidated income statement under each of the following methods? C. What is the amount of Consolidated Equipment in its December 31, 2021, consolidated balance sheet under each of the following methods? d. What is Adams's January 1, 2021, Retained Earnings account balance assuming Adams accounts for its investment in Clay using the: Equity value method. Initial value method. Show less b. Consolidated Expense c. Consolidated Equipment d. Retained Earnings Equity method Initial value method Partial equity method Req A Req B to D Req E and F Reg G e. What worksheet adjustment to Adams's January 1, 2021, 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 view transaction list Consolidation Worksheet Entries Record the adjustment to retained earnings if Adams accounts for its investment in Clay under the initial value method. Note: Enter debits before credits. Date Accounts Debit Credit January 01, 2021 Record entry Clear entry view consolidation entries Reqa Reg B to D Req E and F Reg G What is consolidated net income for 2021? Consolidated net income
