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Question: On January 1, 2021, Access IT Company

On January 1, 2021, Access IT Company exchanged $1,000,000 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 $1,960,000.
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:

On January 1, 2021, Access IT Company exchanged $1-1

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 $1,500,000.
Prepare an acquisition-date consolidation worksheet for Access IT and its variable interest entity.


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