Posted: December 18th, 2022
Pritano company acquired all the net assets of succo company
Asset Purchase, Contingent Consideration
Pritano Company acquired all the net assets of Succo Company on December 31, 2010, for $2,160,000 cash. The balance sheet of Succo Company immediately prior to the acquisition showed:
|
Book value |
Fair value |
|
|
Current assets |
$ 960,000 |
$ 960,000 |
|
Plant and equipment |
1,080,000 |
1,440,000 |
|
Total |
$2,040,000 |
$2,400,000 |
|
Liabilities |
$ 180,000 |
$ 216,000 |
|
Common stock |
480,000 |
|
|
Other contributed capital |
600,000 |
|
|
Retained earnings |
780,000 |
|
|
Total |
$2,040,000 |
As part of the negotiations, Pritano agreed to pay the stockholders of Succo $360,000 cash if the postcombination earnings of Pritano averaged $2,160,000 or more per year over the next two years.
Required:
Prepare the journal entries on the books of Pritano to record the acquisition on December 31, 2010. It is expected that the earnings target is likely to be met.
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