The Following Balance Sheets Have Been Prepared on December 31

question 36

Essay

The following balance sheets have been prepared on December 31, 2013 for Clarke Corp. and Jensen Inc. Additional Information: Clarke uses the cost method to account for its 50% interest in Jensen, which it acquired on January 1, 2010. On that date, Jensen's retained earnings were $20,000. The acquisition differential was fully amortized by the end of 2013. Clarke sold Land to Jensen during 2012 and recorded a $15,000 gain on the sale. Clarke is still using this Land. Clarke's December 31, 2013 inventory contained a profit of $10,000 recorded by Jensen. Jensen borrowed $20,000 from Clarke during 2013 interest-free. Jensen has not yet repaid any of its debt to Clarke. Both companies are subject to a tax rate of 20%. Prepare a Balance Sheet for Clarke on December 31, 2013 assuming that Clarke's Investment in Jensen is a joint venture investment and is reported using the equity method.

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Definitions:

Truck Driver

An individual professionally licensed to operate trucks and responsible for transporting goods over short or long distances.

Employee

An individual who works under a contract of employment, receiving compensation for providing services to an employer.

Third Party

An individual or group besides the two primarily involved in a situation or contract, often implicated in legal or financial transactions.

Authorized

Having official permission or approval to do something, especially in a legal or formal context.