Answer and how to do problems - Chapter 5 & 6
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Answer and how to do problems - Chapter 5 & 6

Course Number: ACCT 102, Spring 2011

College/University: UCSD

Word Count: 308

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On December 31, 2011, PanTech Company invests $20,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as the primary beneficiary of SoftPlus. Previously, PanTech had no interest in SoftPlus. Immediately after PanTechs investment, SoftPlus presents the following balance sheet: Cash $ Marketin g software 140,000 Computer equipment Total...

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December On 31, 2011, PanTech Company invests $20,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as the primary beneficiary of SoftPlus. Previously, PanTech had no interest in SoftPlus. Immediately after PanTechs investment, SoftPlus presents the following balance sheet: Cash $ Marketin g software 140,000 Computer equipment Total assets 20,000 40,000 $ 200,000 Long-term debt Noncontrolling interest PanTech equity interest Total liabilities and equity 1 2 0, $0 0 0 6 0, 0 0 0 2 0, 0 0 0 2 0 0, $0 0 0 Each of the above amounts represents an assessed fair market value at December 31, 2011, except for the marketing software. (a) If the marketing software was undervalued by $20,000, what amounts for SoftPlus would appear in PanTechs December 31, 2011, consolidated financial statements? (Credit balances should be entered with a minus sign. Omit the "$" sign in your response.) Cash Marketing software Computer equipment Long-term debt Noncontrolling interest PanTech equity interest Gain on bargain purchase $ (b) If the marketing software was overvalued by $20,000, what amounts for SoftPlus would appear in 31, PanTechs December 2011, consolidated financial statements? (Credit balances should be entered with a minus sign. Omit the "$" sign in your response.) Cash Marketing software Computer equipment Long-term debt Noncontrolling interest PanTech equity interest Goodwill $ Explanation: (a) Implied valuation and excess allocation for Softplus. Noncontrolling interest fair value Consideration transferred by PanTech $ 20,000 Total business fair value Fair value of VIE net assets Excess net asset value fair value 60,000 80,000 100,000 $ 20,000 PanTech recognizes the $20,000 excess net asset fair value as a bargain purchase and records all of SoftPlus assets and liabilities at their individual fair values. (b) Implied valuation and excess valuation for Softplus. Noncontrolling interest fair value Consideration transferred by PanTech $ 20,000 Total business fair value Fair value of VIE net identifiable assets Goodwill 60,000 80,000 60,000 $ 20,000 When the fair value of a VIE (that is a business) is greater than assessed asset values, all identifiable assets and liabilities are reported at fair values (unless a previously held interest) and the difference is treated as goodwill.

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UCSD - ACCT - 102
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UCSD - ACCT - 102
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UCSD - ACCT - 102
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UCSD - ACCT - 102
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UCSD - ACCT - 102
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UCSD - ACCT - 102
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UCSD - ACCT - 102
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UCSD - ACCT - 102
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