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Course Content $/$ Chapter $6/$ Chapter $6$ Homework

Chapter $6$ Homework

Question $3$ Not complete Mark $7\mathrm{.}78$ out of $10\mathrm{.}00$

Elimination of intercompany profits for variable interest entities $($VIEs$)$ and voting interest entities

Assume that on January $1,2019,$ a Reporting Company acquires a $35$ percent interest in a Legal Entity for $$392,000$ cash. The fair value of the $65$ percent int not acquired by the Reporting Company is $$728,000.$ The fair value and book value of the identifiable net assets of the Legal entity equals $$1,120,000.$ The Reporting Company has a right to $35$ percent of the reported income $($loss$)$ of the Legal Entity. The Legal Entity is determined to be a VIE, and the Reporting Company is determined to be primary beneficiary. For the year ended December $31,2019,$ the Reporting Company and the VIE reported the following preconsolidation income statements assuming that the Reporting Company applies the equity method:

$\backslash$table$[[,\backslash$table$[[$Reporting$],[$Company$]],$VIE$],[$Sales$,$$$1,232,000,$$$336,000$