my Branson paid $607,500 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2017. On that date, the subsidiary had a book value of $373,000 (common stock of $200,000 and retained earnings of $173,000), although various unrecorded royalty agreements (10-year remaining life) were assessed at a $199,000 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 $45,000 if Wolfpack's income exceeded $150,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability-adjusted present value of this contingent consideration at $31,500. On December 31, 2017, based on Wolfpack's earnings to date, Branson increased the value of the contingency to $36,000 During the subsequent two years, Wolfpack reported the following amounts for income and dividends: Dividends Declared Net Income 80,500 90,500 $25,000 2017 2018 35,000 In keeping with the original acquisition agreement, on December 31, 2018, Branson paid the additional $45,000 performance fee to Wolfpack's previous owners 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 2017 and 2018 to adjust its contingent performance obligation for changes in fair value and the December 31, 2018, payment. c. Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the equity method. d. Prepare consolidation worksheet entries as of December 31, 2018, assuming that Branson has applied the initial value method. Consolidation Worksheet Entries 1 Record the acquisition of the shares of its subsidiary Wolfpack Note: Enter debits before credits. Transaction General Journal Debit Credit 1 view general journal Record entry Clear entry Record the adjustment of contingent performance obligation for changes made. 1 Record the adjustment of contingent performance obligation for changes in fair value. Record the payment of performance fee. 3 it Credit = journal entry has been entered Note Record entry Clear entry view general journal Prepare consolidation worksheet entries as of December 31, 2018, assuming that required for a transaction/event, select "No journal entry required" in the first ac view transaction list X 1 Prepare entry S. 2 Prepare entry A 3 Prepare entry I Prepare entry D. 4 5 Prepare entry E. Cred = journal entry has been entered Note view transaction list X: 1 Prepare entry C. Prepare entry S 3 Prepare entry A Prepare entry I 4 Prepare entry E. Credit journal entry has been entered Note Record entry view general jo Clear entry t LO
