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.

---

Definitions:

Developed

Pertains to countries that have a high level of industrialization, a high standard of living, and a well-established economic structure.

Evaluating Mutual Funds

The process of assessing the performance, management, and investment strategies of mutual funds to determine their suitability for an investor.

Rank Portfolios

The process of arranging portfolios in order according to a certain criterion, such as return or risk.

Nearly Identical

Refers to items or entities that are almost the same in appearance, characteristics, or quality, with very minor differences.