VIE Elimination of intercompany profits for variable interest entities (VIES) and voting interest entities Assume that on January 1, 2019, a Reporting Company acquires a 35 percent interest in a Legal Entity for $441,000 cash. The fair value of the 65 percent interest not acquired by the Reporting Company is $819,000. The fair value and book value of the identifiable net assets of the Legal entity equals $1,260,000. The Reporting Company has a right to 35 percent of the reported income (loss) of the Legal Entity. The Legal Entity is determined to be a VIE, and the Reporting Company is determined to be primary beneficiary. For the year ended December 31, 2019, the Reporting Company and the VIE reported the following pre-consolidation income statements assuming that the Reporting Company applies the equity method: Reporting Company Sales $1,386,000 $378,000 Costs of goods sold (831,600) (252,000) Gross profit 554,400 126,000 Operating expenses (221,760) (37,800) Equity method income (loss) from VIE (44,730) $287,910 $88,200 Assume that the Legal Entity's income statement for the year ended December 31, 2019 includes sales to the Reporting Company, and $189,000 of these sales are still in Reporting Company's ending inventory. On intercompany sales, the Legal Entity earns a gross profit equal to 40 percent of sales price. Assume that all of these intercompany items are in the ending inventory of the Reporting Company on December 31, 2019. 0 Net income a. Show how the Equity method income (loss) from VIE is computed. Note: Use a negative sign with answer only to indicate equity method loss from VIE. Reporting company's portion of VIE's net income $ Impact of intercompany sales in equity income Equity method income (loss) from VIE $ 0 $ 0 0 b. Compute the amount of consolidated net income $ 0 c. Compute the amount of consolidated net income attributable to the noncontrolling interest $ 0 d. Compute the amount of consolidated net income attributable to the controlling interest $ 0 $ 0 e. How would your answers to items (b) through (d) change if the Legal Entity is a "voting interest entity?" a Consolidated net income Consolidated net income attributable to noncontrolling interest $ Consolidated net income attributable to controlling interest 0 $ 0