Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,234,440 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 962,320 $962,320 Plant and equipment 1,186,440 1,337,450 Total $2,148,760 $2,299,770 Liabilities $191,390 $214,050 Common stock 471,160 Other contributed capital 584,100 Retained earnings 902,110 Total $2,148,760 As part of the negotiations, Pritano agreed to pay the stockholders of Succo $385,210 cash if the post-combination earnings of Pritano averaged $2,234,440 or more per year over the next two years. The estimated fair value of the contingent consideration was $148,740 on the date of the acquisition. (a) Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings (b) At the end of 2014, the estimated fair value of the contingent consideration increased to $191,300. Prepare the journal entry to record the change in the fair value of the contingent consideration, if needed. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings

Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,234,440 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 962,320 $962,320 Plant and equipment 1,186,440 1,337,450 Total $2,148,760 $2,299,770 Liabilities $191,390 $214,050 Common stock 471,160 Other contributed capital 584,100 Retained earnings 902,110 Total $2,148,760 As part of the negotiations, Pritano agreed to pay the stockholders of Succo $385,210 cash if the post-combination earnings of Pritano averaged $2,234,440 or more per year over the next two years. The estimated fair value of the contingent consideration was $148,740 on the date of the acquisition. (a) Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings (b) At the end of 2014, the estimated fair value of the contingent consideration increased to $191,300. Prepare the journal entry to record the change in the fair value of the contingent consideration, if needed. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

(a)

Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings

(b)

At the end of 2014, the estimated fair value of the contingent consideration increased to $191,300. Prepare the journal entry to record the change in the fair value of the contingent consideration, if needed. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings
Cash Common Stock Current Assets Gain on Change in Fair Value of Contingent Consideration Goodwill Liabilities Liability for Contingent Consideration Loss on Change in Fair Value of Contingent Consideration No Entry Other Contributed Capital Plant and Equipment Retained Earnings

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.