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Required: Prepare an acquisition-date consolidation worksheet for Platform and its variable interest entity.

Required: Prepare an acquisition-date consolidation worksheet for Platform and its variable interest entity.

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, 2024, Platform Company exchanged $1,000,000 for 40 percent of the outstanding voting stock of Vector Company. Especially attractive to Platform was a research project underway at Vector that would enhance both the speed and quantity of client- accessible data. Although not recorded in Vector's financial records, the fair value of the research project was considered to be $1,960,000. Also Vector possessed unpatented technology with a fair value of $376,000. In contractual agreements with the sole owner of the remaining 60 percent of Vector, Platform was granted (1) various decision-making rights over Vector's operating decisions and (2) special service purchase provisions at below-market rates. As a result of these contractual agreements, Platform established itself as the primary beneficiary of Vector. Immediately after the purchase, Platform and Vector presented the following balance sheets: (Note: Parentheses indicate credit belances.) Accounts Cash Investment in Vector Capitalized software Computer equipment Communications equipment Patent Total assets Long-term debt Common stock-Platform Common stock-Vector Retained earnings Total liabilities and equity Platform $ 61,000 1,000,000 981,000 1,066,000 916,000 $ 4,824,000 $ (941,000) (2,660,000) (423,000) $ (4,024,000) Vector $ 41,000 156,000 56,000 336,000 191,000 $780,000 $ (616,000) (41,000) (123,000) $ (780,000) Each of the above amounts represents a fair value at January 1, 2024. The fair value of the 60 percent of Vector shares not owned by Platform was estimated at $1,500,000. Required: Prepare an acquisition-date consolidation worksheet for Platform and its variable interest entity. Note: 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. PLATFORM COMPANY AND VECTOR Consolidation Worksheet At January 1, 2024 Consolidation Entries Accounts Platform Vector Debit Credit Noncontrolling Consolidated Interest Balances Cash $ 61,000 $ 41,000 Investment in Vector 1,000,000 Capitalized software 981,000 156,000 Computer equipment 1,066,000 56,000 Communications equipment 916,000 336,000 Research and development asset Patent 191,000 Unpatented Technology Total assets Long-term debt Common stock-Platform Common stock-Vector Retained earnings Noncontrolling interest $ 4,024,000 $ 780,000 S (941,000) $ (616,000) (2.660,000) (423,000) (41,000) (123,000) Total liabilities and equity $ (4,024,000) $ (780,000) $ 0 $ 0
Transcribed Image Text:On January 1, 2024, Platform Company exchanged $1,000,000 for 40 percent of the outstanding voting stock of Vector Company. Especially attractive to Platform was a research project underway at Vector that would enhance both the speed and quantity of client- accessible data. Although not recorded in Vector's financial records, the fair value of the research project was considered to be $1,960,000. Also Vector possessed unpatented technology with a fair value of $376,000. In contractual agreements with the sole owner of the remaining 60 percent of Vector, Platform was granted (1) various decision-making rights over Vector's operating decisions and (2) special service purchase provisions at below-market rates. As a result of these contractual agreements, Platform established itself as the primary beneficiary of Vector. Immediately after the purchase, Platform and Vector presented the following balance sheets: (Note: Parentheses indicate credit belances.) Accounts Cash Investment in Vector Capitalized software Computer equipment Communications equipment Patent Total assets Long-term debt Common stock-Platform Common stock-Vector Retained earnings Total liabilities and equity Platform $ 61,000 1,000,000 981,000 1,066,000 916,000 $ 4,824,000 $ (941,000) (2,660,000) (423,000) $ (4,024,000) Vector $ 41,000 156,000 56,000 336,000 191,000 $780,000 $ (616,000) (41,000) (123,000) $ (780,000) Each of the above amounts represents a fair value at January 1, 2024. The fair value of the 60 percent of Vector shares not owned by Platform was estimated at $1,500,000. Required: Prepare an acquisition-date consolidation worksheet for Platform and its variable interest entity. Note: 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. PLATFORM COMPANY AND VECTOR Consolidation Worksheet At January 1, 2024 Consolidation Entries Accounts Platform Vector Debit Credit Noncontrolling Consolidated Interest Balances Cash $ 61,000 $ 41,000 Investment in Vector 1,000,000 Capitalized software 981,000 156,000 Computer equipment 1,066,000 56,000 Communications equipment 916,000 336,000 Research and development asset Patent 191,000 Unpatented Technology Total assets Long-term debt Common stock-Platform Common stock-Vector Retained earnings Noncontrolling interest $ 4,024,000 $ 780,000 S (941,000) $ (616,000) (2.660,000) (423,000) (41,000) (123,000) Total liabilities and equity $ (4,024,000) $ (780,000) $ 0 $ 0
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