Session A06 - preclass handout F14 - Session A6 Acquisition Accounting and Fair Value Recognition RECORDING BUSINESS COMBINATIONS Contingent

Session A06 - preclass handout F14 - Session A6 Acquisition...

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Session A6 Acquisition Accounting and Fair Value Recognition R ECORDING B USINESS C OMBINATIONS Contingent Consideration Exercise A6-3 Assume that the following two questions are independent from each other. 1.On January 1, 2013, Pops acquired 90% of Son’s outstanding common stock inexchange for 10,000 shares of Pops common stock ($10 par value). Pops Corp’s common stock has a $13.50 per share fair value at the date of the transaction. Assume that immediately preceding the acquisition by Pops, Son, Inc. had 4,500 shares of common stock outstanding and it was trading at $33 per share. On January 1, 2013, Pops contracts with the selling Son stockholders to issue 1,000 additional shares of Pops’ common stock on April 10, 2014 if fiscal year-end December 31, 2013 consolidated income is greater than $1 million. At the acquisition date, the fair value of this contingent-payment provision is $9,000. Assume that fiscal year-end December 31, 2013 consolidated net income is $1.5 million and that on April 10, 2014 the market value of Pops’ common stock is $18 per share. What journal entries are
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  • Fall '15
  • MarcP.Picconi
  • Accounting, $10, $9,000, $13.50

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