Cash Acquisition, Earnings Contingency Pham Company acquired the assets (except for cash) and assumed the liabilities of Senn Company on January 1, 2004, paying $720,000 cash. Senn Company’s December 31, 2003, balance sheet, reflecting both book values and fair values, showed: LO4 Book Value Fair Value Accounts Receivable (net) $72,000 $65,000 Inventory 86,000 99,000 Land 110,000 162,000 Buildings (net) 369,000 450,000 Equipment (net) 237,000 288,000 Total $874,000 $1,064,000 Accounts Payable $83,000 $83,000 Note Payable 180,000 180,000 Common Stock, $2 par value 153,000 Other Contributed Capital 229,000 Retained Earnings 229,000 Total $874,000 As part of the negotiations, Pham Company agreed to pay the former stockholders of Senn Company $135,000 cash if the postcombination earnings of the combined company (Pham)
reached certain levels during 2004 and 2005.

Required:
A. Record the journal entry on the books of Pham Company to record the acquisition on January 1, 2004.
B. Assuming the earnings contingency is met, prepare the journal entry on Pham Company’s books to settle the contingency on January 2, 2006.
C. Repeat requirement (B), assuming the amount of the contingent payment was $80,000 rather than $135,000.