Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $510,000 cash. Immediately after...

Adams, Inc., acquires Clay Corporation on January 1, 2017, in exchange for $510,000 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 $440,000. Credit balances are indicated by parentheses. Adams Clay Current assets $ 300,000 $ 220,000 Investment in Clay 510,000 0 Equipment 600,000 390,000 Liabilities (200,000) (160,000) Common stock (350,000) (150,000) Retained earnings, 1/1/17 (860,000) (300,000) In 2017, Clay earns a net income of $55,000 and declares and pays a $5,000 cash dividend. In 2017, Adams reports net income from its own operations (exclusive of any income from Clay) of $125,000 and declares no dividends. At the end of 2018, selected account balances for the two companies are as follows: Adams Clay Revenues $ (400,000 ) $ (240,000 ) Expenses 290,000 180,000 Investment income Not given 0 Retained earnings, 1/1/18 Not given (350,000 ) Dividends declared 0 8,000 Common stock (350,000 ) (150,000 ) Current assets 580,000 262,000 Investment in Clay Not given 0 Equipment 520,000 420,000 Liabilities (152,000 ) (130,000 ) What are the December 31, 2018, Investment Income and Investment in Clay account balances assuming Adams uses the: Equity method. Initial value method. How does the parent’s internal investment accounting method choice affect the amount reported for expenses in its December 31, 2018, consolidated income statement? How does the parent’s internal investment accounting method choice affect the amount reported for equipment in its December 31, 2018, consolidated balance sheet? What is Adams’s January 1, 2018, 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, 2018, Retained Earnings account balance is required if Adams accounts for its investment in Clay using the initial value method? Prepare the worksheet entry to eliminate Clay’s stockholders’ equity. What is consolidated net income for 2018?

Expert Solution

ekkarill92 answered 1 year ago

Adams, Inc., acquires Clay Corporation on January 1, 2020, in exchange for $663,000 cash. Immediately after...

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. Clay’s 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...

16. On January 1, 2017, Charo Corporation acquires all of the net assets of Ricky Corporation...

16. On January 1, 2017, Charo Corporation acquires all of the net assets of Ricky Corporation for $1,500,000. The following intangible assets are included in the purchase agreement: Assets Acquisition Cost Goodwill and going concern value $175,000 Licenses $ 50,000 Patents $ 75,000 Covenant not to compete for five years $150,000 What is the total amount of amortization allowed in 2017? A) $20,000 B) $15,000 C) $30,000 D) $38,000

Konica Company acquires 40% of the voting stock of Lexmark Corporation on January 1, 2017, for...

Konica Company acquires 40% of the voting stock of Lexmark Corporation on January 1, 2017, for $60,000,000, and treats it as an equity method investment. There were no basis differences. Lexmark reports total net income of $20,000,000 for the period 2017 - 2020, and $5,000,000 for 2021. Lexmark paid no dividends during the period 2017 – 2020 but paid $1,000,000 in dividends in 2021. The accounting year for both companies ends December 31. Lexmark sells merchandise to Konica at a...

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2017, for $3,800...

Perry Company acquires 100% of the stock of Hurley Corporation on January 1, 2017, for $3,800 cash. As of that date Hurley has the following trial balance: Debit Credit Cash $ 500 Accounts receivable 600 Inventory 800 Buildings (net) (5 year life) 1,500 Equipment (net) (2 year life) 1,000 Land 900 Accounts payable $ 400 Long-term liabilities (due 12/31/20) 1,800 Common stock 1,000 Additional paid-in capital 600 Retained earnings 1,500 Total $ 5,300 $ 5,300 Net income and dividends reported...

On January 1, 2017, Astrakan Company acquires 80% of the outstanding common stock of Gobi, Inc....

On January 1, 2017, Astrakan Company acquires 80% of the outstanding common stock of Gobi, Inc. for a purchase price of $970,000. It was determined that the fair value of the non-controlling interest in the subsidiary is $240,000. The book value of the Gobi’s stockholders’ equity on the date of acquisition is $700,000 and its fair value of net assets is $1,100,000. The acquisition-date acquisition accounting premium (AAP) is allocated $250,000 to equipment with a remaining useful life of 10...

On January 1, 2017, Novak Company acquires $320,000 of Spiderman Products, Inc., 8% bonds at a...

On January 1, 2017, Novak Company acquires $320,000 of Spiderman Products, Inc., 8% bonds at a price of $296,540. Interest is received on January 1 of each year, and the bonds mature on January 1, 2020. The investment will provide Novak Company a 11% yield. The bonds are classified as held-to-maturity. Instructions (a) Prepare a 3-year schedule of interest revenue and bond discount amortization, applying the straight-line method. (b) Prepare a 3-year schedule of interest revenue and bond discount amortization,...

Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2017, at...

Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2017, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2018, Goehler has equipment with a book value of $975,000 but a fair value...

On January 1, 2016, Asure Corporation acquires the net assets of BlueBox Inc. and records the...

On January 1, 2016, Asure Corporation acquires the net assets of BlueBox Inc. and records the acquisition as a merger. Asure/s acquisition entry looks like this (amounts in thousands): General Journal Description Debit Credit Current assets 12,000 Plant and equipment 40,000 Identiﬁable intangibles 80,000 Goodwill 700,000 Notes payable 100,000 Cash 700,000 Earnings contingency liability 32,000 Brand names and customer lists comprise the identifiable intangibles. Required For each of the following independent situations, prepare Asure's journal entry, if any, to record...

Immediately after a fill is placed, the excess pore water pressure in an underlying saturated clay...

Immediately after a fill is placed, the excess pore water pressure in an underlying saturated clay is equal to: a. 0 b. 100 lb/ft2 c. The hydrostatic pore water pressure d. The unit weight of the fill times its thickness e. Half of Δσ_z

Harper, Inc. acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2017,...

Harper, Inc. acquires 40 percent of the outstanding voting stock of Kinman Company on January 1, 2017, for $259,200 in cash. The book value of Kinman's net assets on that date was $465,000, although one of the company's buildings, with a $72,200 carrying amount, was actually worth $129,700. This building had a 10-year remaining life. Kinman owned a royalty agreement with a 20-year remaining life that was undervalued by $125,500. Kinman sold inventory with an original cost of $109,200 to Harper...

Question