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Prepare the December 31, 2021, consolidation worksheet for Pikes and its variable interest entity Venti. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and ente this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)

Prepare the December 31, 2021, consolidation worksheet for Pikes and its variable interest entity Venti. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and ente this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)

FINANCIAL ACCOUNTING
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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On January 1, 2021, Pikes Corporation loaned Venti Company $309,000 and agreed to guarantee all of Venti's long- term debt in exchange for (1) decision-making authority over all of Venti's activities and (2) an annual management fee of 25 percent of Venti's annual revenues. As a result of the agreement, Pikes becomes the primary beneficiary of Venti (now a variable interest entity). Pikes' loan to Venti stipulated a 10 percent (market) rate of interest to be paid annually with principal due in 10 years. On January 1, 2021, Pikes estimated that the fair value of Venti's equity shares equaled $84,000 while Venti's book value was $64,000. Any excess fair over book value at that date was attributed to Venti's trademark with an indefinite life. Because Pikes owns no equity in Venti, all of the acquisition-date excess fair over book value is allocated to the noncontrolling interest. Venti paid Pikes 25 percent of its 2021 revenues at the end of the year and recorded the payment in other operating expenses. Venti also paid the interest to Pikes for the loan. On December 31, 2021, Pikes and Venti submitted the following statements for consolidation. (Parentheses indicate credit balances.) Pikes Venti Revenues 2$ (801,000) $ (225,000) Management fee Cost of good sold Other operating expenses (56,250) 630,000 85,000 (30,900) 89,900 64,900 Interest income Interest expense 39,900 Net income (173,150) (30,300) Retained earnings, 1/1 (1,381,800) (173,150) (49,000) (30,300) Net income 76,800 (1,478,150) Dividends declared Retained earnings, 12/31 (79,300) Current assets 405,000 309,000 82,000 Loan receivable from Venti Equipment (net) 904,000 536,000 Trademark 134,000 Total assets 1,618,000 752,000 (101,000) (309,000) (247,700) (15,000) (79,300) Current liabilities (89,850) Loan payable to Pikes Other long-term debt (50,000) (1,478,150) Common stock Retained earnings, 12/31 Total liabilities and equity $(1,618,000) $ (752,000) Prepare the December 31, 2021, consolidation worksheet for Pikes and its variable interest entity Venti. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)
Transcribed Image Text:On January 1, 2021, Pikes Corporation loaned Venti Company $309,000 and agreed to guarantee all of Venti's long- term debt in exchange for (1) decision-making authority over all of Venti's activities and (2) an annual management fee of 25 percent of Venti's annual revenues. As a result of the agreement, Pikes becomes the primary beneficiary of Venti (now a variable interest entity). Pikes' loan to Venti stipulated a 10 percent (market) rate of interest to be paid annually with principal due in 10 years. On January 1, 2021, Pikes estimated that the fair value of Venti's equity shares equaled $84,000 while Venti's book value was $64,000. Any excess fair over book value at that date was attributed to Venti's trademark with an indefinite life. Because Pikes owns no equity in Venti, all of the acquisition-date excess fair over book value is allocated to the noncontrolling interest. Venti paid Pikes 25 percent of its 2021 revenues at the end of the year and recorded the payment in other operating expenses. Venti also paid the interest to Pikes for the loan. On December 31, 2021, Pikes and Venti submitted the following statements for consolidation. (Parentheses indicate credit balances.) Pikes Venti Revenues 2$ (801,000) $ (225,000) Management fee Cost of good sold Other operating expenses (56,250) 630,000 85,000 (30,900) 89,900 64,900 Interest income Interest expense 39,900 Net income (173,150) (30,300) Retained earnings, 1/1 (1,381,800) (173,150) (49,000) (30,300) Net income 76,800 (1,478,150) Dividends declared Retained earnings, 12/31 (79,300) Current assets 405,000 309,000 82,000 Loan receivable from Venti Equipment (net) 904,000 536,000 Trademark 134,000 Total assets 1,618,000 752,000 (101,000) (309,000) (247,700) (15,000) (79,300) Current liabilities (89,850) Loan payable to Pikes Other long-term debt (50,000) (1,478,150) Common stock Retained earnings, 12/31 Total liabilities and equity $(1,618,000) $ (752,000) Prepare the December 31, 2021, consolidation worksheet for Pikes and its variable interest entity Venti. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)
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