Arnprior pays $4,000 in cash to buy Bracebridge. Arnprior also agrees to pay Bracebridges former owners an additional amount if Bracebridges EBITDA exceeds a certain target amount over the next three years. Arnprior values this promise at a present value of $175. Arnprior pays consulting fees of $80 in cash to Goldman Sachs in connection with this acquisition.

Required

a. Prepare the journal entry or entries Arnprior makes to record the acquisition as a merger.

b. Three months after the acquisition, Arnprior determines that the date-of-acquisition fair value of Bracebridges tangible assets was really $1,050. Prepare the journal entry Arnprior makes to record this information.