Question
On December 31, 2014, PanTech Company invests $34,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as
| On December 31, 2014, PanTech Company invests $34,000 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 PanTechs investment, SoftPlus presents the following balance sheet: |
| Cash | $ | 34,000 | Long-term debt | $ | 106,000 | |||
| Marketing software | 154,000 | Noncontrolling interest | 102,000 | |||||
| Computer equipment | 54,000 | PanTech equity interest | 34,000 | |||||
| Total assets | $ | 242,000 | Total liabilities and equity | $ | 242,000 | |||
| Each of the above amounts represents an assessed fair value at December 31, 2014, except for the marketing software. |
| a. | If the marketing software was undervalued by $34,000, what amounts for SoftPlus would appear in PanTechs December 31, 2014, consolidated financial statements? |
| b. | If the marketing software was overvalued by $34,000, what amounts for SoftPlus would appear in PanTechs December 31, 2014, consolidated financial statements? |
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Performance Auditing
Authors: Shrivastava A.
1st Edition
8131316254, 978-8131316252
