On June 30, 2018, Streeter Company reported the following account balances: Receivables $ 51,700 Current liabilities $ (10,400 ) Inventory 87,000 Long-term liabilities (56,000 ) Buildings (net) 83,700 Common stock (90,000 ) Equipment (net) 34,000 Retained earnings (100,000 ) Total assets $ 256,400 Total liabilities and equities $ (256,400 ) On June 30, 2018, Princeton Company paid $309,500 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $17,300 in legal fees. Princeton also agreed to pay $61,100 to the former owners of Streeter contingent on meeting certain revenue goals during 2019. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $20,300. In determining its offer, Princeton noted the following pertaining to Streeter: It holds a building with a fair value $40,500 more than its book value. It has developed a customer list appraised at $29,200, although it is not recorded in its financial records. It has research and development activity in process with an appraised fair value of $33,300. However, the project has not yet reached technological feasibility and the assets used in the activity have no alternative future use. Book values for the receivables, inventory, equipment, and liabilities approximate fair values. Prepare Princeton’s accounting entry to record the combination with Streeter. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On June 30, 2018, Streeter Company reported the following account balances:


Receivables	$	51,700	Current liabilities	$	(10,400	)
Inventory		87,000	Long-term liabilities		(56,000	)
Buildings (net)		83,700	Common stock		(90,000	)
Equipment (net)		34,000	Retained earnings		(100,000	)
Total assets	$	256,400	Total liabilities and equities	$	(256,400	)

On June 30, 2018, Princeton Company paid $309,500 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $17,300 in legal fees. Princeton also agreed to pay $61,100 to the former owners of Streeter contingent on meeting certain revenue goals during 2019. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $20,300.

In determining its offer, Princeton noted the following pertaining to Streeter:

It holds a building with a fair value $40,500 more than its book value.
It has developed a customer list appraised at $29,200, although it is not recorded in its financial records.
It has research and development activity in process with an appraised fair value of $33,300. However, the project has not yet reached technological feasibility and the assets used in the activity have no alternative future use.
Book values for the receivables, inventory, equipment, and liabilities approximate fair values.

Prepare Princeton’s accounting entry to record the combination with Streeter. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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