Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,145,600 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 995,110 $995,110 Plant and equipment 979,390 1,375,740 Total $1,974,500 $2,370,850 Liabilities $187,040 $235,560 Common stock 524,720 Other contributed capital 588,400 Retained earnings 674,340 Total $1,974,500 As part of the negotiations, Pritano Company agreed to issue 9,230 additional shares of its $10 par value common stock to the stockholders of Succo if the average postcombination earnings over the next three years equaled or exceeded $2,481,300. The fair value of the contingent consideration on the date of acquisition was estimated to be $219,700. The contingent consideration (earnout) was classified as equity rather than as a liability. (a) Prepare the journal entries 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 Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment

Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,145,600 cash. The balance sheet of Succo Company immediately prior to the acquisition showed: Book value Fair value Current assets $ 995,110 $995,110 Plant and equipment 979,390 1,375,740 Total $1,974,500 $2,370,850 Liabilities $187,040 $235,560 Common stock 524,720 Other contributed capital 588,400 Retained earnings 674,340 Total $1,974,500 As part of the negotiations, Pritano Company agreed to issue 9,230 additional shares of its $10 par value common stock to the stockholders of Succo if the average postcombination earnings over the next three years equaled or exceeded $2,481,300. The fair value of the contingent consideration on the date of acquisition was estimated to be $219,700. The contingent consideration (earnout) was classified as equity rather than as a liability. (a) Prepare the journal entries 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 Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 55RSCQ

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(a)

Prepare the journal entries 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 Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment
Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment
Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment
Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment
Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment
Cash Common Stock Current Assets Goodwill Liabilities Paid in Capital-Contingent Consideration No Entry Other Contributed Capital Retained Earnings Paid in Capital – Common Stock Paid-in Capital – Preferred Stock Plant and Equipment

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