The Following Balance Sheets Have Been Prepared on December 31

question 16

Essay

The following balance sheets have been prepared on December 31, 2020 for Clarke Corp. and Jensen Inc.
Balance Sheets
$\begin{array}{|l|r|r|}\hline & \text { Clarke } & \text { Jensen } \\\hline \text { Cash } & \$ 30,000 & \$ 20,000 \\\hline \text { Inventory } & \$ 70,000 & \$ 30,000 \\\hline \text { Accounts Receivable } & \$ 180,000 & \$ 70,000 \\\hline \text { Investment in Jensen } & \$ 200,000 & \\\hline \text { Fixed Assets } & \$ 500,000 & \$ 90,000 \\\hline \text { Accumulated Depreciation } & (\$ 280,000) & (\$ 30,000) \\\hline \text { Total Assets } & \$ 700,000 & \$ 180,000 \\\hline \text { Current Liabilities } & \$ 120,000 & \$ 60,000 \\\hline \text { Long-Term Debt } & \$ 400,000 & \$ 20,000 \\\hline \text { Common Shares } & \$ 90,000 & \$ 40,000 \\\hline \text { Retained Earnings } & \$ 90,000 & \$ 60,000 \\\hline \text { Liabilities and Equity } & \$ 700,000 & \$ 180,000\\\hline\end{array}$ Additional Information:
Clarke uses the cost method to account for its 50% interest in Jensen, which it acquired on January 1, 2017. On that date, Jensen's retained earnings were $20,000. The acquisition differential was fully amortized by the end of 2020.
Clarke sold Land to Jensen during 2019 and recorded a $15,000 gain on the sale. Clarke is still using this Land. Clarke's December 31, 2020 inventory contained a profit of $10,000 recorded by Jensen.
Jensen borrowed $20,000 from Clarke during 2020 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 Proportionately Adjusted Balance Sheet for Clarke as at December 31, 2020 assuming that Clarke's Investment in Jensen is a joint operation investment and Clarke reports its investment in Jensen in its proportionately adjusted financial statements. Clarke has proportionate rights (50%) to all of Jensen's assets and proportionate responsibilities (50%) for all of Jensen's liabilities.

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Definitions:

Disadvantaged Populations

Groups of people who face greater obstacles to health, education, and economic opportunity due to social, economic, or environmental disadvantages.

Validity

The degree to which a test or measurement accurately reflects or assesses the specific concept that it is intended to measure.

Reliability

The degree to which an assessment tool or measurement produces stable and consistent results over repeated applications or observations.

Probability Sample

A sampling method in which every member of the population has a known and non-zero chance of being selected.