Reference no: EM133024072

Question - On January 1, 2021, Access IT Company exchanged $900,000 for 30 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 $2,560,000.

In contractual agreements with the sole owner of the remaining 70 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 balance sheets:

(Note: Parentheses indicate credit balances.)

Access IT Net Connect Cash $51,000 $31,000 Investment in Net Connect 900,000 Capitalized software 971,000 146,000 Computer equipment 1,056,000 46,000 Communications equipment 906,000 326,000 Patent 181,000 Total assets $3,884,000 $730,000 Long-term debt $(931,000) $(606,000) Common stock-Access IT (2,560,000) Common stock-Net Connect (31,000) Retained earnings (393,000) (93,000) Total liabilities and equity $(3,884,000) $(730,000)

Each of the above amounts represents a fair value at January 1, 2021. The fair value of the 70 percent of Net Connect shares not owned by Access IT was estimated at $2,100,000.

Required - Prepare an acquisition-date consolidation worksheet for Access IT and its variable interest entity.