Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $697,900 cash. Immediately after the acquisition, the two companies have the following account
Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $697,900 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 $633,200. Credit balances are indicated by parentheses. Current assets Investment in Clay Equipment Liabilities Common stock Retained earnings, 1/1/20 Adams $ 324,000 697,900 811,200 (296,000) (350,000) (1,187,100) Clay $ 292,000 0 554,000 (236,000) (150,000) (460,000) In 2020, Clay earns a net income of $76,200 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 $154,000 and declares no dividends. At the end of 2021, selected account balances for the two companies are as follows: Clay Revenues Expenses Investment income Retained earnings, 1/1/21 Dividends declared Common stock Current assets Investment in Clay Equipment Liabilities Adams $ (586,000) 424,850 Not given Not given 0 (350,000) 605,000 Not given 719, 200 (244,700) $(284,000) 213,000 0 (531,200) 8,000 (150,000) 362,200 0 584,300 (187,400) Complete this question by entering your answers in the tabs below. Req A Req B to D Req E and F Req 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 A b. Consolidated Expense c. Consolidated Equipment d. Retained Earnings Equity method Initial value method Partial equity method Reg 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 1 2 > Record the adjustment to retained earnings if Adams accounts for its investment in Clay under the initial value method. Note: Enter debits before credits. Accounts Debit Credit Date January 01, 2021 Record entry Clear entry view consolidation entries Complete this question by entering your answers in the tabs below. Req A Req B to D Reg E and F Req G What is consolidated net income for 2021? Consolidated net income
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started