Advanced Accounting Unit 5 - 1 award 0 out of 3.00 points...

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1. award: 0 out of 3.00 points Problem 6-24 [LO1] On December 31, 2013, PanTech Company invests $29,000 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 equity interest in SoftPlus. Immediately after PanTech’s investment, SoftPlus presents the following balance sheet: Cash $ 29,000 Long-term debt $ 111,000 Marketing software 149,000 Noncontrolling interest 87,000 Computer equipment 49,000 PanTech equity interest 29,000 Total assets $ 227,000 Total liabilities and equity $ 227,000 Each of the above amounts represents an assessed fair value at December 31, 2013, except for the marketing software. a. If the marketing software was undervalued by $29,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2013, consolidated financial statements? (Credit balances should be entered with a minus sign.) Cash $ 29,000 Marketing software $ 178,000 Computer equipment $ 49,000 Long-term debt $ -111,000 Noncontrolling interest $ -87,000 PanTech equity interest $ -29,000 Gain on bargain purchase $ -29,000 b. If the marketing software was overvalued by $29,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2013, consolidated financial statements? (Credit balances should be entered with a minus sign.) Cash $ 29,000
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Marketing software $ 120,000 Computer equipment $ 49,000 Long-term debt $ -111,000 Noncontrolling interest $ -87,000 PanTech equity interest $ -29,000 Goodwill $ 29,000 Explanation: a. Implied valuation and excess allocation for Softplus. Noncontrolling interest fair value $ 87,000 Consideration transferred by PanTech 29,000 Total business fair value 116,000 Fair value of VIE net assets 145,000 Excess of net asset value over fair value $ 29,000 PanTech recognizes the $29,000 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 $ 87,000 Consideration transferred by PanTech 29,000 Total business fair value 116,000 Fair value of VIE net identifiable 87,000
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assets Goodwill $ 29,000 2. award: 0 out of 7.00 points Problem 6-26 [LO2] Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2010, Hamilton sold $2,600,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 9 percent payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2012. Both companies utilize the straight-line method of amortization. Prepare the consolidation worksheet entries to recognize the effects of the intra- entity bonds at each of the following dates.
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