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Problem $3-22($Algo$)($LO $3-3$a$,3-3$b$,3-4)$

Adams, Incorporated, acquires Clay Corporation on January $1,2023,$ in exchange for $$527,000$ cash. Immediately after the acquisition, the two companies have the following account balances. Clay$$s equipment $($with a five$-$year remaining life$)$ is actually worth $$448,800.$ Credit balances are indicated by parentheses.

Items Adams Clay

Current assets $ $394,000$ $ $267,000$

Investment in Clay $527,0000$

Equipment $630,800396,000$

Liabilities $(286,000)(199,000)$

Common stock $(350,000)(150,000)$

Retained earnings, $1/1/23(915,800)(314,000)$

In $2023,$ Clay earns a net income of $$54,300$ and declares and pays a $$5,000$ cash dividend. In $2023,$ Adams reports net income from its own operations $($exclusive of any income from Clay$)$ of $$172,000$ and declares no dividends. At the end of $2024,$ selected account balances for the two companies are as follows:

Items Adams Clay

Revenues $ $(460,000)$ $ $(270,000)$

Expenses $333,500202,500$

Investment income Not given $0$

Retained earnings, $1/1/24$ Not given $(363,300)$

Dividends declared $08,000$

Common stock $(350,000)(150,000)$

Current assets $695,000335,700$

Investment in Clay Not given $0$

Equipment $511,300453,900$

Liabilities $(226,900)(162,700)$

Required:

What are the December $31,2024,$ Investment Income and Investment in Clay account balances assuming Adams uses the:

Equity method.

Initial value method.

What is the amount of Consolidated Expenses in its December $31,2024,$ consolidated income statement under each of the following methods?

What is the amount of Consolidated Equipment in its December $31,2024,$ consolidated balance sheet under each of the following methods?

What is Adams$$s January $1,2024,$ 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 $1,2024,$ 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 $2024?$Problem $3-22($Algo$)($LO $3-3$a$,3-3$b$,3-4)$

Adams, Incorporated, acquires Clay Corporation on January $1,2023,$ in exchange for $$527,000$ 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 $$448,800.$

Credit balances are indicated by parentheses.

In $2023,$ Clay earns a net income of $$54,300$ and declares and pays a $$5,000$ cash dividend. In $2023,$ Adams reports net income from

its own operations $($exclusive of any income from Clay$)$ of $$172,000$ and declares no dividends. At the end of $2024,$ selected account

balances for the two companies are as follows:

Required:

a$.$ What are the December $31,2024,$ Investment Income and Investment in Clay account balances assuming Adams uses the:

Equity method.

Initial value method.

b$.$ What is the amount of Consolidated Expenses in its December $31,2024,$ consolidated income statement under each of the

following methods?

c$.$ What is the amount of Consolidated Equipment in its December $31,2024,$ consolidated balance sheet under each of the following

methods?

d$.$ What is Adams's January $1,2024,$ Retained Earnings account balance assuming Adams accounts for its investment in Clay using

the:

Equity value method.

Initial value method.

e$.$ What worksheet adjustment to Adams's January $1,2024,$ 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.

g$.$ What is consolidated net income for $2024?$

Complete this question by entering your answers in the tabs below.

Req $B$ to $D,$ Req $E$ and $F$

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