Question

On January 1, 2018, Primair Corporation loaned Vista Company $348,000 and agreed to guarantee all of Vista's long-term debt in exchange for (1) decision-making authority over all of Vista's activities and (2) an annual cash payment of 25 percent of Vista's revenues. As a result of the agreement, Primair is the primary beneficiary of Vista (a variable interest entity). Primair's loan to Vista stipulated a 10 percent (market) rate of interest to be paid annually On January 1, 2018, Primair estimated that the fair value of Vista's equity shares equaled $110,000 while Vista's book value was $40,300. Any excess fair over book value at that date was attributed to Vista's trademark with an indefinite life Because Primair owns no equity in Vista, all of the acquisition-date excess fair over book value is allocated to the noncontrolling interest. Vista paid Primair 25 percent of its 2018 revenues at the end of the year. On December 31, 2018, Primair and Vista submitted the following statements for consolidation. Parentheses indicate credit balances Primair Vista Revenues Cost of good sold Other operating expenses Interest income Interest expense (887,500) 646,800 82,200 (34,800) (222,700) 88,800 29,500 34,800 (69,600) (25,300) (69,600) Net income (193,300) Retained earnings, 1/1 Net income (1,603,000) (193,300) 283,500 Dividends declared (1,512,800) Retained earnings, 12/31 Current assets Lo 472,100 348,000 842,000 (94,900) 51,700 an receivable from Vista Equipment (net) Trademark 542,900 46,500 641,100 (18,700) (164,500) (348,000) (15,000) 1,662,100 Total assets Current liabilities Long-term debt Loan payable to Primair Common stock (99,300) tained earnings, 12/31 Total liabilities and equity (50,000) 1,512,800) 94,900 (1,662,100) (641,100)

Answer 1

	Primair	Vista	Adj. &Elim.				NCI	Consolidated
Revenues	-887,500	-222,700						-1,110,200
Cost of good sold	646,800	88,800						735,600
Other operating expenses	82,200	29,500						111,700
Interest income	-34,800		(IE)	34800				0
Interest expense		34,800			(IE)	34,800		0
Net Income	-193,300	-69,600
Consolidated net income								-262,900
to noncontrolling interest							-13,925	13,925
to Primair								-248,975
Retained earnings 1/1	-1,603,000	-25,300	(S)	25,300				-1,603,000
Net income	-193,300	-69,600						-248,975
Dividends declared	283,500	0						283,500
Retained earnings 12/31	-1,512,800	-94,900						-1,568,475
Current assets	472,100	51,700						523,800
Loan receivable from Vista	348,000				(P)	348,000		0
Equipment (net)	842,000	542,900						1,384,900
Trademark	0	46,500	(A)	69,700				116,200
Total assets	1,662,100	641,100						2,024,900
Curren Fair value of Vista 110000 Book value                     40,300 Excess fair over book value                     69,700 Life Dep Trademark                     69,700 indefinite 0 Consolidated net income 262,900 To NCI 13925 TO controlling interest 248,975 t liabilities	-99,300	-18,700						-118,000
Long-term debt		-164,500						-164,500
Loan payable to Primair		-348,000	(P)	348,000				0
Common stock	-50,000	-15,000	(S)	15,000				-50,000
					(S)	40,300
Noncontrolling interest					(A)	69,700	-110,000	-123,925
Retained earnings 12/31	-1,512,800	-94,900						-1,568,475
Total liabilities and equity	-1,662,100	-641,100		492,800		492,800		-2,024,900

Workings