Prepare the consolidation worksheet for primair and vista

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Reference no: EM131624697

Problem -

On January 1, 2018, Primair Corporation loaned Vista Company $492,000 and agreed to guarantee all of Vista's long-term debt in exchange for (1) decision-making authority over all of Vista's activities and (2) an annual cash payment of 25 percent of Vista's revenues. As a result of the agreement, Primair is the primary beneficiary of Vista (a variable interest entity). Primair's loan to Vista stipulated a 7 percent (market) rate of interest to be paid annually.

On January 1, 2018, Primair estimated that the fair value of Vista's equity shares equaled $130,000 while Vista's book value was $47,600. Any excess fair over book value at that date was attributed to Vista's trademark with an indefinite life.

Because Primair owns no equity in Vista, all of the acquisition-date excess fair over book value is allocated to the noncontrolling interest.

Vista paid Primair 25 percent of its 2018 revenues at the end of the year. On December 31, 2018, Primair and Vista submitted the following statements for consolidation. Parentheses indicate credit balances.

Primair Vista

Revenues (727,500 ) (284,100 )

Cost of good sold 530,500 113,300 

Other operating expenses 67,800 37,800 

Interest income (34,440 ) 0 

Interest expense 0 34,440 

Net income (163,640 ) (98,560 )

Retained earnings, 1/1 (1,443,000 ) (32,600 )

Net income (163,640 ) (98,560 )

Dividends declared 240,100 0 

Retained earnings, 12/31 (1,366,540 ) (131,160 )

Current assets 426,400 73,200 

Loan receivable from Vista 492,000 

Equipment (net) 682,000 768,700 

Trademark 0 65,800 

Total assets 1,600,400 907,700 

Current liabilities (183,860 ) (26,400 )

Long-term debt 0 (243,140 )

Loan payable to Primair (492,000 )

Common stock (50,000 ) (15,000 )

Retained earnings, 12/31 (1,366,540 ) (131,160 )

Total liabilities and equity (1,600,400 ) (907,700 )

In computing the amount of Vista's net income attributable to the noncontrolling interest,

Vista's net income should be reduced by the 25% revenue allocation to Primair.

Interest expense paid to Primair is not excluded from Vista's net income because it is a contractual distribution of Vista's net income to Primair.

Prepare the December 31, 2018, consolidation worksheet for Primair and Vista. (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. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the NCI and Consolidated Totals columns should be entered with a minus sign.)

Reference no: EM131624697

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