On November 21, 2016, Tesla acquired SolarCity by issuing stock valued at $2.146 billion dollars. Tesla issued 11,124,497 shares of 0.001 par value common stock.

On the date of acquisition, the allocation of the purchase consideration was as follows (condensed) (dollars in thousands):

Assets acquired
Cash...................................................................$ 213,523
Accounts Receivable.............................................74,619
Inventory................................................................91,878
Solar energy systems......................................5,781,496
Property, plant and equipment.....................1,056,312
Intangible assets.................................................356,510
Prepaid expenses................................................199,864
Other.....................................................................638,908
............................................................................8,513,110
Liabilities Assumed
Accounts payable................................................230,078
Accrued liabilities................................................238,590
Debt....................................................................3,525,130
Deferred revenues..............................................271,128
Other.....................................................................950,423
............................................................................5,215,349
Noncontrolling interests (not acquired)........1,063,057
Net Assets Acquired.........................................2,234,704
Bargain gain...........................................................88,727
Total Purchase Price.....................................$2,145,977

Questions:

A. Assuming this were treated as an asset acquisition (business combination), prepare the journal entry on Tesla’s books to record the acquisition.

B. Tesla disclosed the following concerning the bargain gain:
(a) Gain on acquisition

The accounting guidance requires that a gain resulting from the fair value of acquired net assets being greater than the consideration paid to acquire the net assets be recorded as a gain included in the results of operations on the acquisition date. We recognized a gain on acquisition of $88.7 million in the fourth quarter of 2016, which is recorded in other income (expense), net on our Consolidated Statements of Operations.

We reassessed the recognition and measurement of identifiable assets and liabilities acquired and concluded that all acquired assets and liabilities were recognized and that the valuation procedures and resulting estimates of fair values were appropriate. The primary factor contributing to the gain relates to the change in the overall price of our common stock from the time that the Merger Agreement was executed on July 31, 2016 to the acquisition date. During this time, our stock price decreased from $230.01 to $185.04, which in turn reduced the fair value of the consideration.

(b). What was the reason Tesla was able to acquire SolarCity for a bargain?

C. Tesla’s year-end is December 31. The number reported above for the purchase allocation were preliminary as of the end of 2016. During 2017, Tesla made a measurement period adjustment that reduced the net assets acquired by $57.746 million. The measurement period adjustment reduced other assets by $11.571 million and increased accrued liabilities by $46,175 million. The finalized bargain gain is $30.981 million.

a). What is the journal entry to record the measurement period adjustment?

b.) How is the bargain gain reported in 2016 and 2017?