On January 1, 2018, Access IT Company exchanged $910,000 for 40percent of the outstanding voting stock of Net Connect. Especiallyattractive to Access IT was a research project underway at NetConnect that would enhance both the speed and quantity ofclient-accessible data. Although not recorded in Net Connect'sfinancial records, the fair value of the research project wasconsidered to be $1,870,000.
In contractual agreements with the sole owner of the remaining60 percent of Net Connect, Access IT was granted (1) variousdecision-making rights over Net Connect's operating decisions and(2) special service purchase provisions at below-market rates. As aresult of these contractual agreements, Access IT establisheditself as the primary beneficiary of Net Connect. Immediately afterthe purchase, Access IT and Net Connect presented the followingbalance sheets:
| Access IT | | Net Connect |
| Cash | $ | 52,000 | | | $ | 32,000 | |
| Investment in Net Connect | | 910,000 | | | | | |
| Capitalized software | | 972,000 | | | | 147,000 | |
| Computer equipment | | 1,057,000 | | | | 47,000 | |
| Communications equipment | | 907,000 | | | | 327,000 | |
| Patent | | | | | | 182,000 | |
| Total assets | $ | 3,898,000 | | | $ | 735,000 | |
| Long-term debt | $ | (932,000 | ) | | $ | (607,000 | ) |
| Common stock-Access IT | | (2,570,000 | ) | | | | |
| Common stock-Net Connect | | | | | | (32,000 | ) |
| Retained earnings | | (396,000 | ) | | | (96,000 | ) |
| Total liabilities and equity | $ | (3,898,000 | ) | | $ | (735,000 | ) |
|
Each of the above amounts represents a fair value at January 1,2018. The fair value of the 60 percent of Net Connect shares notowned by Access IT was $1,365,000.
Prepare an acquisition-date consolidated worksheet for Access ITand its variable interest entity
|
| | ACCESS IT COMPANY AND NET CONNECT | | Consolidation Worksheet | | January 1, 2018 | | | | Consolidation Entries | | Consolidated | | Access IT | Net Connect | Debit | Credit | NCI | Balances | | Cash | $52,000 | $32,000 | | | | | | Investment in NetConnect | 910,000 | | | | | | | Capitalized software | 972,000 | 147,000 | | | | | | Computer equipment | 1,057,000 | 47,000 | | | | | | Communications equipment | 907,000 | 327,000 | | | | | | Research and development asset | | | | | | | | Patent | | 182,000 | | | | | | Goodwill | | | | | | | | Total assets | $3,898,000 | $735,000 | | | | $0 | | Long-term debt | $(932,000) | $(607,000) | | | | | | Common stock-Access IT | (2,570,000) | | | | | | | Common stock-NetConnect | | (32,000) | | | | | | Retained earnings | (396,000) | (96,000) | | | | | | Noncontrolling interest | | | | | | | | Total liabilities andequity | $(3,898,000) | $(735,000) | $0 | $0 | | $0 |
|
