Reference no: EM133114760
Question - Consolidating a VIE at the Date of Acquisition - Pelican Mountain Resorts uses a financial entity to obtain secured debt. It sells customer timeshare agreements to the entity, who finances the purchases with debt secured by future collections on the timeshare agreements. On January 1, 2019, Pelican determines that the entity is a VIE and Pelican is its primary beneficiary. Pelican has no equity interest in the VIE. The VIE's balance sheet on that date is as follows:
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Receivables
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$4,000,000
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Secured debt
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$4,250,000
|
|
Other assets
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500,000
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Equity
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250,000
|
|
Total assets
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$4,500,000
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Total debt & equity
|
$4,500,000
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On January 1, 2019, the VIE's other assets are undervalued by $65,000 and it has previously unrecorded identifiable intangible assets of $1,000,000. The fair value of the VIE is $1,500,000.
Required - Prepare the eliminating entries required to consolidate the VIE with Pelican on January 1, 2019, assuming the VIE and Pelican are
a. already under common control.
b. not under common control.