The following balance sheets have been prepared as at December $31,$ Year $6,$ for Kay Corp. and Adams Ventures:

Kay Adams

Cash $ $75,000$ $ $37,500$

Accounts receivable $110,000192,500$

Inventory $637,500422,500$

Property and plant $1,430,000922,500$

Investment in Adams $375,0000$

$ $2,627,500$ $ $1,575,000$

Current liabilities $ $415,000$ $ $165,000$

Bonds payable $518,750615,000$

Common shares $960,000480,000$

Retained earnings $733,750315,000$

$ $2,627,500$ $ $1,575,000$

Additional Information

Kay acquired its $40\%$ interest in Adams for $$375,000$ in Year $2,$ when Adams$$s retained earnings amounted to $$185,000.$ 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 $$75,000$ 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 $$50,000.$

On December $31,$ Year $6,$ Adams owes Kay $$44,000.$

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.