Reference no: EM132791712
Question - Elimination of intercompany profits for variable interest entities (VIEs) and voting interest entities
Assume that on January 1, 2019, a Reporting Company acquires a 35 percent interest in a Legal Entity for $245,000 cash. The fair value of the 65 percent interest not acquired by the Reporting Company is $455,000. The fair value and book value of the identifiable net assets of the Legal entity equals $700,000. The Reporting Company has a right to 35 percent of the reported income (loss) of the Legal Entity. The Legal Entity is determined to be a VIE, and the Reporting Company is determined to be primary beneficiary. For the year ended December 31, 2019, the Reporting Company and the VIE reported the following pre-consolidation income statements assuming that the Reporting Company applies the equity method:
|
Reporting Company
|
VIE
|
Sales
|
$770,000
|
$210,000
|
Costs of goods sold
|
(462,000)
|
(140,000)
|
Gross profit
|
308,000
|
70,000
|
Operating expenses
|
(123,200)
|
(21,000)
|
Equity method income (loss) from VIE
|
(24,850)
|
0
|
Net income
|
$159,950
|
$49,000
|
Assume that the Legal Entity's income statement for the year ended December 31, 2019 includes sales to the Reporting Company, and $105,000 of these sales are still in Reporting Company's ending inventory. On intercompany sales, the Legal Entity earns a gross profit equal to 40 percent of sales price. Assume that all of these intercompany items are in the ending inventory of the Reporting Company on December 31, 2019.
Required -
a. Show how the Equity method income (loss) from VIE is computed. Note: Use a negative sign with answer only to indicate equity method loss from VIE.
Reporting company's portion of VIE's net income
Impact of intercompany sales in equity income
Equity method income (loss) from VIE
b. Compute the amount of consolidated net income?
c. Compute the amount of consolidated net income attributable to the non-controlling interest?
d. Compute the amount of consolidated net income attributable to the controlling interest?
e. How would your answers to items (b) through (d) change if the Legal Entity is a "voting interest entity?"
Consolidated net income
Consolidated net income attributable to non-controlling interest
Consolidated net income attributable to controlling interest
Analyse five core aspects of china current fyp
: Analyse five (5) core aspects of China's current FYP and critically appraise how this plan helps to influence China's standing in the global economy.
|
Biological basis of morality
: 1. What is the difference between the transcendentalist and empiricist views regarding the origin of ethics?
|
Explain what the specific issue is
: Consider the issues of regulation and antitrust activity as may relate to your industry. Identify one prominent government regulation or antitrust issue that re
|
What is the rate of unemployment
: What is the "rate of unemployment", what components does it consists of, and how is it calculated? What happened to this rate in Australia during 1970-1983, dur
|
Compute the amount of consolidated net income
: A Reporting Company acquires a 35 percent interest in a Legal Entity for $245,000 cash. Compute the amount of consolidated net income
|
Demonstrates the effects of the proposed policies
: Draw An appropriate Aggregate Supply and Demand Graph and Short-Run Phillips Curve clearly demonstrates the effects of the proposed policies.
|
What is the entry on december assuming jefferson uses
: What is the entry on December 31 assuming Jefferson uses the net method, and the obligation is still unpaid on the said date?
|
Give the entires on may and april
: There is no established cash price for the equipment. Give the entires on May 1, 2016, Dec. 1, 2016 and April 30, 2017. Do not include the amounts.
|
What should be included in current notes payable account
: E. Included on Harding Company's liability, What should be included in current notes payable account in the statement of financial poison on December 31, 2016?
|