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On January 1 2014 Access IT Company exchanged $1000000 for 40 percent of the outstanding voting stock of Net Connect Especially attractive to Access IT was a research project underway at Net

On January 1, 2014, 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:

Each of the above amounts represents a fair value at January 1, 2014. The fair value of the 60 percent of Net Connect shares not owned by Access IT was $1,500,000. Prepare an acquisition-date consolidated worksheet for Access IT and its variable interest entity.

Jul 21 2020 View more View Less

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