Calof Inc. acquires 100% of the common shares of Xiyu Company on January 1, Year 4, for the following consideration: . 5,000 common shares with a market value of $275,000 . A contingent payment of $40,000 cash on January 1, Year 5 if Xiyu generates cash flows from operations of $10,000 or more in Year 4 . A payment of sufficient shares of Calof common shares to ensure a total value of $275,000 if the price per share is less than $55 on January 1, Year 5 For the cash contingency, Calof estimates that there is a 30% chance that the $40,000 payment will be required. For the share contingency, Calof estimates a 20% probability that the 5,000 shares issued will have a market value of $260,000 on January 1, Year 5, and an 80% probability that the market value of the 5,000 shares will exceed $275,000. Calof uses an interest rate of 4% to incorporate the time value of money. In Year 4, Xiyu exceeds the cash flow from operations threshold of $10,000, thus requiring an additional payment of $40,000. Also, Calof's stock price had fallen to $54 at January 1, Year 5. Because the acquisition agreement called for a $275,000 total value at January 1, Year 5, Calof must issue an additional 93 shares ($5,000 shortfall/$54 per share) to the former owners of Xiyu. Required (a) Prepare Calof's journal entry at January 1, Year 4, to record the investment in Xiyu including any contingent consideration. (b) Prepare adjusting entries relating to the contingent consideration at December 31, Year 4. (c) Indicate what amounts relating to the contingent consideration will appear on the balance sheet at December 31, Year 4, and how they will be presented