Solved: On January 1 2018 Primair Corporation loaned

Vista Company 300 000

On January 1, 2018, Primair Corporation loaned Vista Company $300,000 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 7 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
$150,000 while Vista's book value was $55,000. 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 non-controlling
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.

In computing the amount of Vista's net income attributable to the non-controlling interest,

• Vista's net income should be reduced by the 25% revenue allocation to Primair.

• Interest expense paid to Primair is not excluded from Vista's net income because it is a
contractual distribution of Vista's net income to Primair.

Prepare the December 31, 2018, consolidation worksheet for Primair and Vista.

On January 1 2018 Primair Corporation loaned Vista Company 300 000

ANSWER
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