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On January 1, 2021. Pikes Corporation loaned Vent Company $315,000 and agreed to guarantee all of Venti's long-term debt in exchange for (1) decision-making authority

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On January 1, 2021. Pikes Corporation loaned Vent Company $315,000 and agreed to guarantee all of Venti's long-term debt in exchange for (1) decision-making authority over all of Ventis activities and 2) an annual management fee of 25 percent of Venti's annual revenues. As a result of the agreement. Pikes becomes the primary beneficiary of Venti (now a variable interest entity). Plkes loan to Venti stipulated a 6 percent (market) rate of interest to be paid annually with principal due in 10 years. On January 1, 2021. Pikes estimated that the fair value of Venti's equity shares equaled $91,000 while Venti's book value was 571.000 Any excess fair over book value at that date was attributed to Venti's trademark with an indefinite life. Because Pikes owns no equity in Venti, all of the acquisition date excess fair over book value is allocated to the noncontrolling interest Venti paid Pikes 25 percent of its 2021 revenues at the end of the year and recorded the payment in other operating expenses. Veru also paid the interest to Pikes for the loan. On December 31, 2021 Pikes and Venti submitted the following statements for consolidation. (Parentheses indicate credit balances) Pikes Revenues (885, eee) $ (232,000) Management fee (58.00) Cost of good sold 637,00 Other operating expenses 92,660 65,600 (15,960) Interest expense (155,960) (35,200) Retained earnings, 1/1 (1,383,200) (56,000) Net income (155,960) (35,200) Dividends declared Venti 5 90,600 Interest income 40,600 Net income 78,200 (1960) (91.200) 78.200 (1,468,960) 440,000 316,000 811,000 (91,200) 89,000 Dividends declared Retained earnings, 12/31 Current assets Loan receivable from Venti Equipment (net) Trademark Total assets Current liabilities Loan payable to Pikes Other long-term debt Common stock Retained earnings, 12/31 Total liabilities and equity 1,567,600 (56,040) 543,000 141,000 773,000 (188,888 (316,000) (242,800) (15,000) (91,200 $ 273,000) 0 (50,000) (1,460,960) $(1,567,000) Prepare the December 31, 2021, consolidation worksheet for Pikes and its variable Interest entity Venti. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.) Pikes and Venti Companies Consolidation Worksheet Year Ended December 31, 2021 Consolidation Entries Pikes Venti Debit Credit 808,000 $ 232 000 58,000 0 Consolidated Balances NCI $ Revenues Management fee 637 000 92 000 18 960 0 90.600 65 600 0 s 40.600 35 200 155,960 $ $ 0 S 0 S 56,0005 35 200 $ $ 0 Cost of good sold Other operating expenses Interest income Interest expense Net income Consolidated net income to noncontrolling interest to Pikes Retained earnings 1/1 Net income Dividends declared Retained oamings, 12/31 Current assets Loan receivable from Venti Equipment (net) Trademark Total assets Current liabilities Loan payable to Pikes Other long-term debt Common stock Noncontrolling interest Retained earnings, 12/31 Total liabilities and equity 0 91,200 89.000 0 $ 1383 200 $ 155,960 78,200 1,400,000 $ 440,000 $ 316,000 811,000 0 1,567 000 $ 56,040 0 0 543,000 141,000 773,000 108 000 $ $ 50,000 0 316,000 242,800 15,000 0 91,200 773,000 0 1,460,960 $ 1,567,000 $ $ 0

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