ject-Axlsx The following balance sheets have been prepared as at Dece.docx

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ject-Axlsx The following balance sheets have been prepared as at December 31, Year 6. for Kay Corp. and Adams Ventures: Accounts receivable Inventory Property and plant Investment in Adams Kay 78,000 116,000 645,000 436,000 378,000 $ 2,653,000 418,000 522.500 972.000 740,500 $ 2,653,000 Adams $ 39,000 197,000 427,000 927,000 O $1,590,000 3 168,000 618.000 486,000 318.000 $1,590,000 Current liabilities Bonds payable Common shares Retained earnings Additional Information Kay acquired its 40% interest in Adams for $378,000 in Year 2, when Adams's retained earnings amounted to $188,000. 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 $78,000 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 $53,000. On December 31, Year 6, Adams owes Kay $47,000. 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)
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