Question

Exercise 2-5 Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,362,200 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 891,390 $891,390 Plant and equipment 1,075,210 1,477,700 Total $1,966,600 $2,369,090 Liabilities $178,520 $232,990 Common stock 483,630 Other contributed capital 544,200 Retained earnings 760,250 Total $1,966,600 As part of the negotiations, Pritano agreed to pay the stockholders of Succo $379,850 cash if the post-combination earnings of Pritano averaged $2,362,200 or more per year over the next two years. The estimated fair value of the contingent consideration was $148,590 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.)

Answer 1

Pritano Company Debit in $ Credit in $ 891390 1477700 Journal Enteries Trans. Particulars Current Assets PP&E Goodwill Cash Contingent Consideration Liabilities 374690 2362200 148590 232990