Exercise 2-5

Pritano Company acquired all the net assets of Succo Company on December 31, 2013, for $2,362,200 cash. The balance sheet of Succo Company immediately prior to the acquisition showed:

		Book value		Fair value
Current assets		$ 891,390		$891,390
Plant and equipment		1,075,210		1,477,700
Total		$1,966,600		$2,369,090
Liabilities		$178,520		$232,990
Common stock		483,630
Other contributed capital		544,200
Retained earnings		760,250
Total		$1,966,600

As part of the negotiations, Pritano agreed to pay the stockholders of Succo $379,850 cash if the post-combination earnings of Pritano averaged $2,362,200 or more per year over the next two years. The estimated fair value of the contingent consideration was $148,590 on the date of the acquisition.

(a) Prepare the journal entry on the books of Pritano to record the acquisition on December 31, 2013. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)