On June 30, 2021, Streeter Company reported the following account balances: Receivables $ 51,050 Current liabilities $ (11,800 ) Inventory 85,750 Long-term liabilities (52,000 ) Buildings (net) 83,400 Common stock (90,000 ) Equipment (net) 33,600 Retained earnings (100,000 ) Total assets $ 253,800 Total liabilities and equities $ (253,800 )
On June 30, 2021, Streeter Company reported the following account balances:
| Receivables | $ | 51,050 | Current liabilities | $ | (11,800 | ) |
| Inventory | 85,750 | Long-term liabilities | (52,000 | ) | ||
| Buildings (net) | 83,400 | Common stock | (90,000 | ) | ||
| Equipment (net) | 33,600 | (100,000 | ) | |||
| Total assets | $ | 253,800 | Total liabilities and equities | $ | (253,800 | ) |
On June 30, 2021, Princeton Company paid $325,900 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $15,200 in legal fees. Princeton also agreed to pay $58,600 to the former owners of Streeter contingent on meeting certain revenue goals during 2022. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $17,700.
In determining its offer, Princeton noted the following pertaining to Streeter:
- It holds a building with a fair value $43,400 more than its book value.
- It has developed a customer list appraised at $30,500, although it is not recorded in its financial records.
- It has research and development activity in process with an appraised fair value of $37,100. 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 entries to record the combination with Streeter
1- Record the acquisition of Streeter Company.
2- Record the legal fees related to the combination.
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