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.
A. 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 like to be met.
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