Question: On December 31 Year 4 Russell Inc invested 20 000 in

On December 31, Year 4, Russell Inc. invested $20,000 in Charger Corp. Prior to this Russell had no interest in Charger. Upon review of the documentation related to Russell’s investment, the controller of Russell determined that Charger is a variable interest entity and Russell is its primary beneficiary. Immediately after
Russell’s investment, Charger Corp. prepared the following balance sheet:
Each of the above amounts represents the fair value at December 31, Year 4, except for marketing software. Charger Corp. is carrying on a business.
Required:
(a) If the marketing software was undervalued by $20,000, what reported amounts for Charger’s financial statement items would appear in Russell’s December 31, Year 4, consolidated balance sheet?
(b) If the marketing software was overvalued by $20,000, what reported amounts for Charger’s financial statement items would appear in Russell’s December 31, Year 4, consolidated balance sheet?
(c) Calculate goodwill and non-controlling interest for part (b) under parent company extension theory.

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  • CreatedJune 08, 2015
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