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Hite Corporation is contemplating the acquisition of Smith Company's net assets on December 31, 2011.

Hite Corporation is contemplating the acquisition of Smith Company’s net assets on December 31, 2011. It is considering making an offer, which would consist of a cash payout of $200,000 along with giving 15,000 shares of its $2 par value common stock that is currently selling for $20 per share. Hite also agrees that it will pay an additional $50,000 on January 1, 2014, if the average net income of Smith’s business unit exceeds $80,000 for 2012 and 2013. The likelihood of reaching that target is estimated to be 75%. The balance sheet of Smith Company as of December 31, 2011 is given below, along with estimated fair values of the net assets to be acquired.

Book Value Fair Value
Current Assets:
Notes Receivable $33,000 $33,000
Inventory $89,000 $80,000
Prepaid Expenses $15,000 $15,000
Investments $36,000 $55,000
Fixed Assets:
Land $15,000 $90,000
Buildings $115,000 $170,000
Equipment $256,000 $250,000
Vehicles $32,000 $25,000
Franchise $56,000 $70,000
Total Assets $647,000 $788,000

Book Value Fair Value
Current Liabilities:
Accounts Payable $63,000 $63,000
Taxes Payable $15,000 $15,000
Interest Payable $3,000 $3,000
Other Liabilities:
Bonds Payable $250,000 $250,000
Disct on bonds payable ($18,000) ($30,000)
Stockholders' Equity:
Common Stock $50,000
Paid-in capital in $200,000
excess of par
Retained Earnings $84,000
Total L & E $647,000

1. Do value analysis and prepare the entry on the books of Hite Corporation to record the acquisition of Smith Company
2. Assume that the net income of the Smith business unit is $120,000 for 2012. As a result, the likelihood of paying the contingent consideration is believed to be 90% What, if any, adjusting entry is required as of December 3, 2012?
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