The first attached photo is the information.
The second and third is the question that 1)Assuming that the investment in Adams is a control investment 2)Assuming that the investment in Adams is a joint operation and is reported using proportionately adjusted financial statements
I need to know how the account "Investment in Adams" changes under 1) and 2) conditions. (Fill the blank cells in the second and third photo, the filled cells are all correct)
The following balance sheets have been prepared as at December 31, Year 6, for Kay Corp. and Adams Ventures: Kay Adams Cash $ 65, 000 32, 500 Accounts receivable 90, 000 177, 500 Inventory 612, 500 407, 500 Property and plant 1, 410, 000 907, 500 Investment in Adams 365, 000 $ 2, 542, 500 1, 525, 000 Current liabilities $ 405, 000 155, 000 Bonds payable 506, 250 605, 000 Common shares 920, 000 460, 000 Retained earnings 711, 250 305, 000 $ 2, 542, 500 $ 1, 525, 000 Additional Information . Kay acquired its 40% interest in Adams for $365,000 in Year 2, when Adams's retained earnings amounted to $175,000. The acquisition differential on that date was fully depleted by the end of Year 6. . In Year 5, Kay sold land to Adams and recorded a gain of $65,000 on the transaction. Adams is still using this land. . The December 31, Year 6, inventory of Kay contained a profit recorded by Adams amounting to $40,000. . On December 31, Year 6, Adams owes Kay $34,000. . Kay has used the cost method to account for its investment in Adams. . Use income tax allocation at a rate of 40%, but ignore income tax on the acquisition differential. Required: (a) Prepare three separate balance sheets for Kay as at December 31, Year 6. (i) Assuming that the investment in Adams is a control investment.(c) Prepare the financial statements required for part (a) using the worksheet approach. (Input all amounts as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Leave no cells blank - be certain to enter "0" wherever required. Omit $ sign in your response.) i) Control Investment CONSOLIDATED FINANCIAL STATEMENT WORKING PAPER KAY CORP. CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, YEAR 6 Entries Statement of Financial Position Kay Adams Dr. Cr. Consolidated Cash 65000 $ 32500 O $ 97500 Accounts receivable 90000 177500 $ 34000 233500 Inventory 612500 407500 40000 980000 Property and plant 1410000 907500 65000 2252500 Investment in Adams 365000 C Deferred income taxes 42000 O 42000 $ 2542500 $ 1525000 $ 3605500 Current liabilities 405000 155000 34000 526000 Bonds payable 506250 605000 1111250 Common shares 920000 460000 460000 920000 Retained earnings 711250 305000 412600 603650 Non-controlling interest O 444600 444600 $ 2542500 $ 1525000 $ 3605509ii) Joint Operation Investment Entries Statement of Financial Position Kay Adams (1004) Adams (404) Dr. Er. Consolidated Cash 65000 $ 32500 $ 13000 O $ 78000 Accounts receivable 90000 177500 71000 13600 147400 Inventory 612500 407500 163000 16000 759500 Investment in Adams 365000 $ O Deferred income taxes 6800 16800 Property and plant |1410000 $ 907500 363000 O 26000 1747000 $ 254250C $ 1525000 610000 $ 2748700 Current liabilities $ 405000 155000 62000 13600 $ 453400 Bonds payable 506250 605000 242000 748250 Common shares 920000 460000 184000 184000 920000 Retained earnings 711250 305000 122000 206200 627050 $ 2542500 $ 1525000 610000 $ 2748700 69 $
