Branson paid $465,000 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1,2009. On that date, the subsidiary had a book value of $340,000 (common stock of $200,000 and retained earnings of $140,000), although various unrecorded royalty agreements were assessed at a $100,000 fair value. The royalty agreements had an estimated 10-year remaining useful life.

In negotiating the acquisition price, Branson also promised to pay Wolfpack’s former owners an additional $50,000 if Wolfpack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability adjusted present value of this contingent consideration at $35,000. On December 31, 2009, based on Wolfpack’s earnings to date, Branson increased the value of the contingency to $40,000.

During the subsequent two years, Wolfpack reported the following amounts for income and dividends:

Net Income Dividends Paid LO1 2009 $65,000 $25,000 2010 75,000 35,000 In keeping with the original acquisition agreement, on December 31, 2010, Branson paid the additional $50,000 performance fee to Wolfpack’s previous owners.

Using the acquisition method and assuming no goodwill impairment charges, prepare each ofthe following:

a. Branson’s entry to record the acquisition of the shares of its Wolfpack subsidiary.

b. Branson’s entries at the end of 2009 and 2010 to adjust its contingent performance obligation for changes in fair value and the December 31, 2010, payment.

c. Consolidation worksheet entries as of December 31,2010, assuming that Branson has applied the equity method.

d. Consolidation worksheet entries as of December 31,2010, assuming that Branson has applied the initial value method.