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How to solve Branson paid $ 6 2 1 , 0 0 0 cash for all of the outstanding common stock of Wolfpack, Incorporated, on
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Branson paid $ cash for all of the outstanding common stock of Wolfpack, Incorporated, on January On that date, the
subsidiary had a book value of $common stock of $ and retained earnings of $ although various
unrecorded royalty agreements year remaining life were assessed at a $ fair value. Any remaining excess fair value was
considered goodwill.
In negotiating the acquisition price, Branson also promised to pay Wolfpack's former owners an additional $ if Wolfpack's
income exceeded $ total over the first two years after the acquisition. At the acquisition date, Branson estimated the
probabilityadjusted present value of this contingent consideration at $ On December based on Wolfpack's earnings
to date, Branson increased the value of the contingency to $
During the subsequent two years, Wolfpack reported the following amounts for income and dividends:
In keeping with the original acquisition agreement, on December Branson paid the additional $ performance fee to
Wolfpack's previous owners.
Required:
Prepare each of the following:
a Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary.
b Branson's entries at the end of and to adjust its contingent performance obligation for changes in fair value and the
December payment.
c Prepare consolidation worksheet entries as of December assuming that Branson has applied the equity method.
d Prepare consolidation worksheet entries as of December assuming that Branson has applied the initial value method.
Consolidation Worksheet Entries
Prepare Entry C to convert parent's beginning retained earnings to full accrual basis on December
Note: Enter debits before credits.
tableEntryAccounts,Debit,CreditEntry C
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