On January 1, 2024, Platform Company exchanged $1,000,000 for 40 percent of the outstanding voting stock of Vector Company. Especially attractive to Platform was a research project underway at Vector that would enhance both the speed and quantity of client-accessible data. Although not recorded in Vector’s financial records, the fair value of the research project was considered to be $1,960,000. Also Vector possessed unpatented technology with a fair value of $376,000.

In contractual agreements with the sole owner of the remaining 60 percent of Vector, Platform was granted (1) various decision-making rights over Vector’s operating decisions and (2) special service purchase provisions at below-market rates. As a result of these contractual agreements, Platform established itself as the primary beneficiary of Vector. Immediately after the purchase, Platform and Vector presented the following balance sheets:

Each of the above amounts represents a fair value at January 1, 2024. The fair value of the 60 percent of Vector shares not owned by Platform was estimated at $1,500,000.

Prepare an acquisition-date consolidation worksheet for Platform and its variable interest entity.

Transcribed Image Text:

Cash Investment in Vector.. Capitalized software. Computer equipment.. Communications equipment. Patent .... Total assets Long-term debt. Common stock-Platform Common stock-Vector... Retained earnings.. Total liabilities and equity Platform $ 61,000 1,000,000 981,000 1,066,000 916,000 $ 4,024,000 (941,000) (2,660,000) (423,000) $(4,024,000) Vector $ 41,000 156,000 56,000 336,000 191,000 $ 780,000 (616,000) (41,000) (123,000) $(780,000)