On December 31, 2014, PanTech Company invests $20,000 in SoftPlus, a variable in
ID: 2478657 • Letter: O
Question
On December 31, 2014, PanTech Company invests $20,000 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:
Each of the above amounts represents an assessed fair value at December 31, 2014, except for the marketing software.
If the marketing software was undervalued by $20,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2014, consolidated financial statements?
If the marketing software was overvalued by $20,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2014, consolidated financial statements?
Below are the correct and incorrect answers to this problem. Please solve the incorrect answers marked in red with an X. Thanks!
On December 31, 2014, PanTech Company invests $20,000 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:
Explanation / Answer
Answer:a
Working Note: Implied valuation and excess allocation for Softplus.
PanTech recognizes the $20,000 excess net asset fair value as a bargain purchase and records all of SoftPlus’ assets and liabilities at their individual fair values.
Answer:b
Working note:
Cash 20000 Marketing Software 160000 Computer equipment 40000 Long term debt -120000 Noncontrolling interest -60000 Pan Tech equity interest -20000 Gain on bargin purchase -20000Related Questions
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