Question

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?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

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
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On December 31, 2020, Petra Company invests $41,000 in Valery, a variable interest entity. In contractual...
On December 31, 2020, Petra Company invests $41,000 in Valery, a variable interest entity. In contractual agreements completed on that date, Petra established itself as the primary beneficiary of Valery. Previously, Petra had no equity interest in Valery. Immediately after Petra’s investment, Valery presents the following balance sheet: Cash $ 41,000 Long-term debt $ 99,000 Marketing software 161,000 Noncontrolling interest 123,000 Computer equipment 61,000 Petra equity interest 41,000 Total assets $ 263,000 Total liabilities and equity $ 263,000 Each of...
34) On January 1, 2017, Prince Company purchased an 80% interest in the common stock of...
34) On January 1, 2017, Prince Company purchased an 80% interest in the common stock of Sivet Company for $1,040,000, which was $60,000 greater than the book value of equity acquired. The difference between implied and book value relates to the subsidiary’s land. The following information is from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2017: SIVET CONSOLIDATED COMPANY BALANCES 1/01/17 retained earnings $300,000 $1,400,000 Net income 220,000 680,000 Dividends declared...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million and is preparing consolidated financial statements as of that date. Under the acquisition method of accounting, which of the following statements is correct with respect to Montgomery's consolidated financial statements? A. The noncontrolling interest in Better Gravy Boat's net assets is normally presented between the liabilities section and stockholders' equity section of Montgomery's balance sheet under all circumstances. B. The noncontrolling interest in Better...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million...
Montgomery Company purchases 85% of Better Gravy Boat Corporation on December 31, 20X6, for $10 million and is preparing consolidated financial statements as of that date. Under the acquisition method of accounting, which of the following statements is correct with respect to Montgomery's consolidated financial statements? A. The noncontrolling interest in Better Gravy Boat's net assets is normally presented between the liabilities section and stockholders' equity section of Montgomery's balance sheet under all circumstances. B. The noncontrolling interest in Better...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also...
Following are preacquisition financial balances for Padre Company and Sol Company as of December 31. Also included are fair values for Sol Company accounts. Padre Company Sol Company Book Values Book Values Fair Values 12/31 12/31 12/31 Cash $ 400,000 $ 120,000 $ 120,000 Receivables 220,000 300,000 300,000 Inventory 410,000 210,000 260,000 Land 600,000 130,000 110,000 Building and equipment (net) 600,000 270,000 330,000 Franchise agreements 220,000 190,000 220,000 Accounts payable (300,000) (120,000) (120,000) Accrued expenses (90,000) (30,000) (30,000) Longterm liabilities...
Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of...
Several years ago Polar Inc. acquired an 80% interest in Icecap Co. The book values of Icecap's asset and liability accounts at that time were considered to be equal to their fair values. Polar’s acquisition value corresponded to the underlying book value of Icecap so that no allocations or goodwill resulted from the transfer. The following selected account balances were from the individual financial records of these two companies as of December 31, 2018: Polar Icecap Inc. Co. Sales $    ...
On January 1, 2015, Panther Incorporated purchased 80% of the Staffer Company’s outstanding voting stock for...
On January 1, 2015, Panther Incorporated purchased 80% of the Staffer Company’s outstanding voting stock for $840,000 in cash and other considerations. On that date, Panther assessed the net fair value of Staffer’s identifiable liabilities and assets at $1,050,000. The 20% noncontrolling interest was assessed at a fair value of $210,000. Amortization of excess fair value over book value was not part of the acquisition. On December 31, 2016, each company’s financial records included the account balances shown below in...
Following are several figures reported for Allister and Barone as of December 31, 2018: Allister Barone...
Following are several figures reported for Allister and Barone as of December 31, 2018: Allister Barone Inventory $ 410,000 $ 210,000 Sales 820,000 620,000 Investment income not given Cost of goods sold 410,000 310,000 Operating expenses 185,000 255,000 Allister acquired 80 percent of Barone in January 2017. In allocating the newly acquired subsidiary's fair value at the acquisition date, Allister noted that Barone had developed a customer list worth $60,000 that was unrecorded on its accounting records and had a...
Following are the individual financial statements for Gibson and Davis for the year ending December 31,...
Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018: Gibson Davis Sales $ (821,000 ) $ (422,000 ) Cost of goods sold 382,000 211,000 Operating expenses 262,000 66,000 Dividend income (24,000 ) 0 Net income $ (201,000 ) $ (145,000 ) Retained earnings, 1/1/18 $ (774,000 ) $ (485,000 ) Net income (201,000 ) (145,000 ) Dividends declared 50,000 40,000 Retained earnings, 12/31/18 $ (925,000 ) $ (590,000 ) Cash and receivables...
Izmir A.S. issued convertible bonds at their face value of 114,000 lira on December 31, 2017....
Izmir A.S. issued convertible bonds at their face value of 114,000 lira on December 31, 2017. The bonds have a 12-year life with interest of 9 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 11 percent. Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT