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 balance sheets:

(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	)
Retained earnings		(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.)

 

Cash Investment in Net Connect Capitalized software Computer equipment Communications equipment Research and development asset Patent Goodwill Total assets Long-term debt Common stock-Access IT Common stock-Net Connect Retained earnings Noncontrolling interest Total liabilities and equity Access IT $ ACCESS IT COMPANY AND NET CONNECT Consolidation Worksheet At January 1, 2021 $ 50.000 980,000 979,000 1,004,000 914,000 (417.000) Net Connect $ 39,000 $ 3.000.000 $ 770.000 $ (930.000) $ (614.000) (2,040,000) (3.990.000) 154.000 54.000 334,000 189.000 (30.000) (117,000) $ (770.000) Consolidation Entries Credit Debit 1,940,000 354,000 15.800 46,800 x 980,000 1,376,400 $ 2,356,400 $ 2,356,400 NCI (23.400) X (70.200) x (1.376.400) X Consolidated Balances $ 98.000 0 1,133.000 1,118,000 1,248,000 1,940,000 189.000 354,000 S 6,080,000 $ (1.553,000) (2,640,000) 0 (417,000) (1,470.000) $ (6.080.000)