The Following Balance Sheets Have Been Prepared on December 31

question 51

Essay

The following balance sheets have been prepared on December 31, 2016 for Clarke Corp. and Jensen Inc.
Balance Sheets
Additional Information:
Clarke uses the cost method to account for its 50% interest in Jensen, which it acquired on January 1, 2013. On that date, Jensen's retained earnings were $20,000. The acquisition differential was fully amortized by the end of 2016.
Clarke sold Land to Jensen during 2015 and recorded a $15,000 gain on the sale. Clarke is still using this Land. Clarke's December 31, 2016 inventory contained a profit of $10,000 recorded by Jensen.
Jensen borrowed $20,000 from Clarke during 2016 interest-free. Jensen has not yet repaid any of its debt to Clarke.
Both companies are subject to a tax rate of 20%.
$\begin{array}{|l|l|l|} \hline& \text { Clarke } & \text { Jensen } \\\hline & & \\\hline \text { Cash } & \$ 30,000 & \$ 20,000 \\\hline \text { Imwentory } & \$ 70,000 & \$ 30,000 \\\hline\\\hline \text { Accounts Receivable } & \$ 180,000 & \$ 70,000 \\\hline \text { Imvestment in Jensen } & \$ 200,000 & \\\hline \text { Fixed Assets } & \$ 500,000 & \$ 90,000 \\\hline \text { Accumulated Depreciation } & \$ 280,000) & (\$ 30,000) \\\hline \text { Total Assets } & \$ 700,000 & \$ \mathbf{1 8 0 , 0 0 0} \\\hline \text { Current Liabilities } & \$ 120,000 & \$ 60,000 \\\hline \text { Long-Term Debt } & \$ 400,000 & \$ 20,000 \\\hline \text { Common Shares } & \$ 90,000 & \$ 40,000 \\\hline \text { Retained Earnings } & \$ 90,000 & \$ 60,000 \\\hline \text { Liabifities and Equity } & \$ 700,000 & \$ 180,000 \\\hline\end{array}$
-Prepare a Balance Sheet for Clarke on December 31, 2016 assuming that Clarke's Investment in Jensen is a joint venture investment and is reported using the equity method.

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Definitions:

Worker Ownership

A business model where the company is owned wholly or in part by its employees, often designed to give workers a stake in the company's success and a voice in its operation.

Business Responsibilities

The obligations and duties of businesses to act ethically, with accountability towards society, the environment, and their stakeholders.

American Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with minimal government intervention.

Government Planning

The process by which a government sets priorities, establishes goals, and devises strategies to achieve economic, social, and political objectives.