Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $663,000 cash. Immediately after the acquisition, the two companies have the following account balances. Clays equipment (with a five-year remaining life) is actually worth $611,300. Credit balances are indicated by parentheses.

	Adams			Clay
Current assets	$	408,000		$	259,000
Investment in Clay		663,000			0
Equipment		822,300			554,000
Liabilities		(211,000	)		(225,000	)
Common stock		(350,000	)		(150,000	)
Retained earnings, 1/1/20		(1,332,300	)		(438,000	)

In 2020, Clay earns a net income of $50,700 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 $189,000 and declares no dividends. At the end of 2021, selected account balances for the two companies are as follows:

	Adams			Clay
Revenues	$	(572,000	)	$	(382,000	)
Expenses		414,700			286,500
Investment income		Not given			0
Retained earnings, 1/1/21		Not given			(483,700	)
Dividends declared		0			8,000
Common stock		(350,000	)		(150,000	)
Current assets		712,000			305,200
Investment in Clay		Not given			0
Equipment		725,800			610,400
Liabilities		(144,700	)		(192,000	)

1. What are the December 31, 2021, Investment Income and Investment in Clay account balances assuming Adams uses the:

• Equity method.
• Initial value method.

1. What is the amount of Consolidated Expenses in its December 31, 2021, consolidated income statement under each of the following methods?

2. What is the amount of Consolidated Equipment in its December 31, 2021, consolidated balance sheet under each of the following methods?

3. 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.

1. 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?

2. Prepare the worksheet entry to eliminate Clays stockholders equity.

3. What is consolidated net income for 2021?