In: Accounting
On December 31, 2017, PanTech Company invests $23,000 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 $ 23,000 Long-term debt $ 138,000
Marketing software 161,000 Noncontrolling
interest 69,000
Computer equipment 46,000 PanTech equity
interest 23,000
Total assets $ 230,000 Total liabilities
and equity $ 230,000
Each of the above amounts represents an assessed fair value at December 31, 2017, except for the marketing software.
Accordingly the December 31 fair value of SoftPlus is assessed at
$92,000.
a. If the marketing software was undervalued by $23,000, what
amounts for SoftPlus would appear in PanTech's December 31,
2017,
consolidated financial statements?
b. If the marketing software was overvalued by $23,000, what
amounts for SoftPlus would appear in PanTech's December 31,
2017,
consolidated financial statements