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On December 31, 2017, PanTech Company invests $22,000 in SoftPlus, a variable interest entity. In contractual...

On December 31, 2017, PanTech Company invests $22,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as the primary beneficiary of SoftPlus. Previously, PanTech had no equity interest in SoftPlus. Immediately after PanTech’s investment, SoftPlus presents the following balance sheet:

Cash $ 22,000 Long-term debt $ 132,000
Marketing software 154,000 Noncontrolling interest 66,000
Computer equipment 44,000 PanTech equity interest 22,000
Total assets $ 220,000 Total liabilities and equity $ 220,000

Each of the above amounts represents an assessed fair value at December 31, 2017, except for the marketing software. Accordingly the December 31 fair value of SoftPlus is assessed at $88,000.

A. If the marketing software was undervalued by $22,000, what amounts for SoftPlus would appear in PanTech's December 31, 2017, consolidated financial statements?

B. If the marketing software was overvalued by $22,000, what amounts for SoftPlus would appear in PanTech's December 31, 2017, consolidated financial statements?

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Answer #1

A. Consolidated financial statements of PanTech's as on December 31, 2017

Assets Amount Liabilities Amount
Cash $22000 Long-term debt $132000
Marketing Software $176000 Noncontrolling interest $66000
Computer Equipment $44000 PanTech equity interest $22000
Gain on bargain purchase $22000
Total assets $242000 Total liabilities and equity $242000

B. Consolidated financial statements of PanTech's as on December 31, 2017

Assets Amount Liabilities Amount
Cash $22000 Long-term debt $132000
Marketing Software $132000 Noncontrolling interest $66000
Computer Equipment $44000 PanTech equity interest $22000
Goodwill $22000
Total assets $220000 Total liabilities and equity $220000
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