On January 1, 2021, Access IT Company exchanged $980,000 for 40 percent of the outstanding voting stock of Net Connect. Especially attractive to Access IT was a research project underway at Net Connect that would enhance both the speed and quantity of client-accessible data. Although not recorded in Net Connect's financial records, the fair value of the research project was considered to be $1,940,000. In contractual agreements with the sole owner of the remaining 60 percent of Net Connect, Access IT was granted (1) various decision-making rights over Net Connect's operating decisions and (2) special service purchase provisions at below-market rates. As a result of these contractual agreements, Access IT established itself as the primary beneficiary of N
On January 1, 2021, Access IT Company exchanged $980,000 for 40 percent of the outstanding voting stock of Net Connect. Especially attractive to Access IT was a research project underway at Net Connect that would enhance both the speed and quantity of client-accessible data. Although not recorded in Net Connect's financial records, the fair value of the research project was considered to be $1,940,000.
In contractual agreements with the sole owner of the remaining 60 percent of Net Connect, Access IT was granted (1) various decision-making rights over Net Connect's operating decisions and (2) special service purchase provisions at below-market rates. As a result of these contractual agreements, Access IT established itself as the primary beneficiary of Net Connect. Immediately after the purchase, Access IT and Net Connect presented the following
(Note: Parentheses indicate credit balances.)
Access IT | Net Connect | ||||||
Cash | $ | 59,000 | $ | 39,000 | |||
Investment in Net Connect | 980,000 | ||||||
Capitalized software | 979,000 | 154,000 | |||||
Computer equipment | 1,064,000 | 54,000 | |||||
Communications equipment | 914,000 | 334,000 | |||||
Patent | 189,000 | ||||||
Total assets | $ | 3,996,000 | $ | 770,000 | |||
Long-term debt | $ | (939,000 | ) | $ | (614,000 | ) | |
Common stock-Access IT | (2,640,000 | ) | |||||
Common stock-Net Connect | (39,000 | ) | |||||
(417,000 | ) | (117,000 | ) | ||||
Total liabilities and equity | $ | (3,996,000 | ) | $ | (770,000 | ) | |
Each of the above amounts represents a fair value at January 1, 2021. The fair value of the 60 percent of Net Connect shares not owned by Access IT was estimated at $1,470,000.
Prepare an acquisition-date consolidation worksheet for Access IT and its variable interest entity. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.)
![ACCESS IT COMPANY AND NET CONNECT
Consolidation Worksheet
At January 1, 2021
Consolidation Entries
Consolidated
Access IT
Net Connect
Debit
Credit
NCI
Balances
Cash
$
59,000
$
39,000
Investment in Net Connect
980,000
Capitalized software
979,000
154,000
Computer equipment
1,064,000
54,000
Communications equipment
914,000
334,000
Research and development asset
Patent
189,000
Goodwill
Total assets
$
3,996,000
$
770,000
Long-term debt
$
(939,000) $
(614,000)
Common stock-Access IT
(2,640,000)
Common stock-Net Connect
(39,000)
Retained earnings
(417,000)
(117,000)
Noncontrolling interest
Total liabilities and equity
$ (3,996,000) $
(770,000)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5bd24d5e-ed33-4881-8643-64f182425bac%2F9520e376-3026-44b7-a0cf-2b46ab0fcff4%2Flj6wwz_processed.png&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)