Contingent Consideration: Future Sales Poly Inc. acquired 100% of the outstanding common stock of Soly Inc. for $1,000,000 cash. If Soly’s cumulative sales for the three years subsequent to the acquisition date exceed $10,000,000, the additional cash of $200,000 is to be paid to Soly’s former shareholders.

Required Prepare the entry to record the business combination. Explain the accounting treatment of the con¬

tingent consideration. What is the entry if Soly’s cumulative sales exceed $10,000,000?