Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Recognition upon initial consolidation of a variable interest entity (VIE) when VIE is a business Assume that prior to January 1, 2016, a Reporting Company

Recognition upon initial consolidation of a variable interest entity (VIE) when VIE is a business Assume that prior to January 1, 2016, a Reporting Company owned a 10 percent interest in a Legal Entity. The Reporting Company acquired its 10 percent ownership interest in the Legal Entity on June 15, 1995 for $20,000, and correctly accounted for this investment under the cost method (i.e., it was a passive investment and it was not marketable). On January 1, 2016, the Reporting Company purchased an additional 30 percent interest in the Legal Entity for $150,000. As a result of an evaluation of the facts and circumstances on January 1, 2016, the Reporting Entity determined that the Legal Entity is a variable interest entity (VIE) and that the Reporting Company is the primary beneficiary of the VIE. The Reporting Company also determined that, on January 1, 2016, the fair value of the previously held 10 percent interest is $50,000. In addition, independent appraisals revealed that the fair value of the noncontrolling interest (i.e., the 60 percent not owned by the Reporting Company) is $300,000. On January 1, 2016, the Legal Entity has reported book values for its identifiable net assets equal to $350,000 and fair values for its identifiable net assets equal to $450,000. Assume that the Legal Entity is a business, as that term is defined in FASB ASC 805 (Business Combinations). Related to the initial consolidation of the Legal Entity on January 1, 2016, determine the following amounts:

image text in transcribed

a. Goodwill $50,000 b. Gain (Loss) on initial consolidation of the Legal Entity Use a negative sign with answer to indicate a loss. $(20,000) x a. Goodwill $50,000 b. Gain (Loss) on initial consolidation of the Legal Entity Use a negative sign with answer to indicate a loss. $(20,000) x

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

define the term outplacement

Answered: 1 week ago

Question

describe the services that an outplacement consultancy may provide.

Answered: 1 week ago