Assume that on January 1, 2019, a Reporting Company acquires a 35 percent interest in a Legal Entity for $392,000 cash. The fair value of the 65 percent interest not acquired by the Reporting Company is $728,000. The fair value and book value of the identifiable net assets of the Legal entity equals $1,120,000. 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: Sales Costs of goods sold Gross profit Operating expenses Equity method income (loss) from VIE Net income Reporting Company VIE $1,232,000 $336,000 (739,200) (224,000) 492,800 112,000 (197,120) (33,600) (39,760) 0 $255,920 $78,400
Assume that on January 1, 2019, a Reporting Company acquires a 35 percent interest in a Legal Entity for $392,000 cash. The fair value of the 65 percent interest not acquired by the Reporting Company is $728,000. The fair value and book value of the identifiable net assets of the Legal entity equals $1,120,000. 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: Sales Costs of goods sold Gross profit Operating expenses Equity method income (loss) from VIE Net income Reporting Company VIE $1,232,000 $336,000 (739,200) (224,000) 492,800 112,000 (197,120) (33,600) (39,760) 0 $255,920 $78,400
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
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Step 1: Introduction:
VIEWStep 2: (a) Show how the Equity method income (loss) from VIE is computed:
VIEWStep 3: (b) Compute the amount of consolidated net income:
VIEWStep 4: (c) Compute the amount of consolidated net income attributable to the noncontrolling interest:
VIEWStep 5: (d) Compute the amount of consolidated net income attributable to the controlling interest:
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