Adams Corporation acquired 90 percent of the outstanding voting shares of Barstow, Inc., on December 31, 2009. Adams paid a total of $603,000 in cash for these shares. The 10 percent noncontrolling interest shares traded on a daily basis at fair value of $67,000 both before and after Adams’s acquisition. On December 31, 2009, Barstow had the following account balances:

Book Value Fair Value

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 160,000 $ 160,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 150,000

Buildings (10-year life) . . . . . . . . . . . . . . . . . . . . 220,000 200,000

Equipment (5-year life) . . . . . . . . . . . . . . . . . . . 160,000 200,000

Patents (10-year life) . . . . . . . . . . . . . . . . . . . . . –0– 50,000

Notes payable (5-year life) . . . . . . . . . . . . . . . . . (200,000) (180,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . (180,000) —

Retained earnings, 12/31/09 . . . . . . . . . . . . . . . (280,000) —

December 31, 2011, adjusted trial balances for the two companies follow:

Adams Barstow,

Corporation Inc.

Debits

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $ 610,000 $ 250,000

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,000 150,000

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 490,000 250,000

Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873,000 150,000

Investment in Barstow, Inc. . . . . . . . . . . . . . . . . 702,000 –0–

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . 480,000 90,000

Depreciation expense . . . . . . . . . . . . . . . . . . . . 100,000 55,000

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 40,000 15,000

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 70,000

Total debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,785,000 $1,030,000

Credits

Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 860,000 $ 230,000

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . 510,000 180,000

Retained earnings, 1/1/11 . . . . . . . . . . . . . . . . . 1,367,000 340,000

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940,000 280,000

Investment income . . . . . . . . . . . . . . . . . . . . . . 108,000 –0–

Total credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,785,000 $1,030,000

a. Prepare schedules for acquisition-date fair-value allocations and amortizations for Adams’s investment in Barstow.

b. Determine Adams’s method of accounting for its investment in Barstow. Support your answer with a numerical explanation.

c. Without using a worksheet or consolidation entries, determine the balances to be reported as of December 31, 2011, for this business combination.

d. To verify the figures determined in requirement (c), prepare a consolidation worksheet for Adams Corporation and Barstow, Inc., as of December 31, 2011.