Answered: From the accounting point of view,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The Zika utility company has a growing market. To meet the growth in demand, Zika established TATA power to build a power plant that Zika will ultimately lease it and use for power production. Zika Acquired25% of TATA's equity for $9,000,000 in cash and guaranteed TATA's liability. On 3/31/2022 and after completing the buildings and equipment, TATA's balance sheet included Total Assets of $300,000,000 and Tata liabilities $264,000,000 and equity of $36,000,000. On the same date (3/31/2022), Zika's balance sheet reported Total Assets of $800,000,000 (including the investment of $9,000,000 in TATA); Total liabilities of $600000000; And equity of $200000000. required：

A. From the accounting point of view, explain the relationship between Zika and TATA. Is Zika the beneficiary of TATA's? Why?

B. Prepare Zika's consolidated balance sheet with its variable interest entity TATA on 3/31/2022.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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