The Vary Company has total assets with a book value of $3,000,000 and a fair value of $4,000,000. A potential primary beneficiary company has guaranteed the debt of the Vary Company and will receive a share of income of the Vary Company based on contractual terms. The primary beneficiary will also have decision power.

a. Will the primary beneficiary company record an investment in the equity of the

Vary Company?

b. Will the Vary Company need to be consolidated. If it is to be consolidated, what adjustments would be needed in the consolidation process?