Branson paid $543,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $401,000 (common stock of $200,000 and retained earnings of $201,000). although various unrecorded royalty agreements (10-year remaining life) were assessed at a $124.000 fair value. Any remaining excess fair value was considered goodwill. in negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $56,000 if Wolfpack's income exceeded $130,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,200. On December 3 2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $44,800. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Net Income 2020 $72,400 2021 82,400 Dividends Declared $25,000 35,000 In keeping with the original acquisition agreement, on December 31, 2021, Branson paid the additional $56,000 performance fee to Wolfpack's previous owners. Prepare each of the following: a. Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary.
Branson paid $543,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that date, the subsidiary had a book value of $401,000 (common stock of $200,000 and retained earnings of $201,000). although various unrecorded royalty agreements (10-year remaining life) were assessed at a $124.000 fair value. Any remaining excess fair value was considered goodwill. in negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $56,000 if Wolfpack's income exceeded $130,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $39,200. On December 3 2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $44,800. During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Net Income 2020 $72,400 2021 82,400 Dividends Declared $25,000 35,000 In keeping with the original acquisition agreement, on December 31, 2021, Branson paid the additional $56,000 performance fee to Wolfpack's previous owners. Prepare each of the following: a. Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Branson paid $543,800 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020. On that
date, the subsidiary had a book value of $401,000 (common stock of $200,000 and retained earnings of $201,000).
although various unrecorded royalty agreements (10-year remaining life) were assessed at a $124.000 fair value. Any
remaining excess fair value was considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $56,000 if
Wolfpack's income exceeded $130,000 total over the first two years after the acquisition. At the acquisition date,
Branson estimated the probability-adjusted present value of this contingent consideration at $39,200. On December 31,
2020, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $44,800.
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
Net
Income
2020 $72,400
2021
82,400
Dividends
Declared
$25,000
35,000
In keeping with the original acquisition agreement, on December 31, 2021, Branson paid the additional $56,000
performance fee to Wolfpack's previous owners.
Prepare each of the following:
a. Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary.
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