Company Pacquired the assets and assumed the liabilities of Company S on January 1, 2019 by issuing 13,000 shares of their $10 par common stock when it was trading for $202/share. Upon completion of the acquisition Company S was dissolved and Company P continued as the sole legal entity housing the operations of both companies. Immediately prior to the acquisition Company S's balance sheet was as follows: Accounts receivable (net) Inventory Land Building (net) Total assets Book Value 240,000 290,000 960,000 1,020,000 $ 2,510,000 Fair Value $ 260,000 320,000 1,508,000 1,332,000 $ 270,000 650,000 Accounts payable Note payable Common stock, $5 par Paid in capital Retained earnings Total liabilities and equity $ 270,000 600,000 420,000 640,000 580,000 $ 2,510,000 Company P also agreed to issue 2,000 additional shares to the former shareholders of Company S in 2021 if post-combination earnings were $1,300,000 or more in 2020. Company P measures goodwill impairment using the present value of future cash flows to estimate the value of the reporting unit (Company S). For both 2020 and 2021 it was determined that it was more likely than not goodwill impairment existed. Information related to these subsequent years is as follows: Present Value Carrying Value of Fair Value of Identifiable Year of Future Cash Flows Identifiable Net Assets* Net Assets 2020 2,600,000 2,550,000 2,575,000 2021 2,780,000 2,670,000 2,800,000 *Identifiable net assets do not include goodwill. Required a) Company P would use acquisition accounting to record the purchase of Company S. Describe what that means in this scenario. Be sure to mention the type of acquisition. b) Prepare the journal entry or entries necessary to record the purchase of Company Son January 1, 2019. c) Net income for the year ended December 31, 2020 was $1,430,000. Prepare the required 2021 journal entry or entries related to contingent consideration. How this have been different if the earnout agreement had promised a cash payment rather than stock? d) Perform the quantitative test for goodwill impairment in 2021. Describe your calculations, results, and the impact to the 2021 income statement (can include screenshot from excel file). Company Pacquired the assets and assumed the liabilities of Company S on January 1, 2019 by issuing 13,000 shares of their $10 par common stock when it was trading for $202/share. Upon completion of the acquisition Company S was dissolved and Company P continued as the sole legal entity housing the operations of both companies. Immediately prior to the acquisition Company S's balance sheet was as follows: Accounts receivable (net) Inventory Land Building (net) Total assets Book Value 240,000 290,000 960,000 1,020,000 $ 2,510,000 Fair Value $ 260,000 320,000 1,508,000 1,332,000 $ 270,000 650,000 Accounts payable Note payable Common stock, $5 par Paid in capital Retained earnings Total liabilities and equity $ 270,000 600,000 420,000 640,000 580,000 $ 2,510,000 Company P also agreed to issue 2,000 additional shares to the former shareholders of Company S in 2021 if post-combination earnings were $1,300,000 or more in 2020. Company P measures goodwill impairment using the present value of future cash flows to estimate the value of the reporting unit (Company S). For both 2020 and 2021 it was determined that it was more likely than not goodwill impairment existed. Information related to these subsequent years is as follows: Present Value Carrying Value of Fair Value of Identifiable Year of Future Cash Flows Identifiable Net Assets* Net Assets 2020 2,600,000 2,550,000 2,575,000 2021 2,780,000 2,670,000 2,800,000 *Identifiable net assets do not include goodwill. Required a) Company P would use acquisition accounting to record the purchase of Company S. Describe what that means in this scenario. Be sure to mention the type of acquisition. b) Prepare the journal entry or entries necessary to record the purchase of Company Son January 1, 2019. c) Net income for the year ended December 31, 2020 was $1,430,000. Prepare the required 2021 journal entry or entries related to contingent consideration. How this have been different if the earnout agreement had promised a cash payment rather than stock? d) Perform the quantitative test for goodwill impairment in 2021. Describe your calculations, results, and the impact to the 2021 income statement (can include screenshot from excel file)