Problem:
On January 1, 2013, Anywhere Tech Company exchanged $840,000 for 40 percent of the outstanding voting stock of Cloud Computing. Especially attractive to Anywhere Tech was a research project underway at Cloud Computing that would enhance both the speed and quantity of client accessible data. Although not recorded in Cloud Computing's financial records, the fair value of the research project was considered to be $1,800,000.
In contractual agreement with the sole owner of the remaining 60 percent of Cloud Computing, Anywhere Tech was granted (1) various decision-making rights over Cloud Computing's operating decisions and (2) special service purchase provisions at below market rates. As a results of these contractual agreements, Anywhere Tech established itself as the primary beneficiary of Cloud Computing. Immediately after the purchase, Anywhere Tech and Cloud Computing presented the following balance sheets:
Anywhere Tech Cloud Computing
Cash .........................................................$45,000 $25,000
Investment in Cloud Computing...................840,000
Capitalized software.....................................965,000 140,000
Computer equipment................................1,050,000 40,000
Communications equipment........................900,000 320,000
Patent.......................................................... 175,000
Total assets...............................$3,800,000 $700,000
Long-term debt..........................................(925,000) (600,000)
Common stock-Anywhere Tech..............(2,500,000)
Common stock-Cloud Computing............ (25,000)
Retained earnings.....................................(375,000) (75,000)
Total liabilities & equity............$(3,800,000) $(700,000)
Each of the above amounts represents a fair value at January 1, 2013. The fair value of the 60 percent of Cloud Computing shares not owned by Anywhere Tech was $1,260,000.
Prepare an acquisition-date consolidated worksheet for Anywhere Tech and its variable interest entity.