Part B: In February 2015, Arctic Cat, Inc., acquired the assets and liabilities of MotorFist, LLC, a privately owned company based in Idaho Falls, Idaho, in exchange for $9.118 million in cash and contingent consideration. Referring to Arctic Cats 2015 annual 10-K report, answer the following questions regarding the MotorFist acquisition.

1. Why did Arctic Cat acquire MotorFist?

2. How was the consideration transferred allocated between cash paid and the contingent consideration (show actual dollar amounts)?

3. Arctic Cat allocated $3,342,000 of the purchase price for this acquisition. Show the computation below for how this amount was determined.

4. What is the maximum potential contingent payout (i.e., earnout) to the former owners of MotorFist? Although not explicitly stated in Arctic Cats fiscal 2015 10-K report (for the year ended March 31, 2015), what may be some possible factors that entered into the determination of the acquisition-date fair value of the contingent consideration?
5. The Artic Cat 10-k:L. ACQUISITION In February 2015, the Company acquired substantially all of the assets of MotorFist, LLC, a privately owned company based in Idaho Falls, Idaho, that designs, develops and distributes high-performance technical riding gear. The Company completed this acquisition to more broadly expand PG&A product offerings for our North America and international markets. The Company invested $9,118,000, to acquire the assets, resulting in an excess purchase price over the estimated fair value of net assets of approximately $3,342,000. The total amount of goodwill is deductible for tax purposes. The acquisition cost included contingent consideration consisting of up to five earnout payments, plus a catch-up payment, for a total of up to $4.0 million. The earnout periods are years one through five with a maximum payout in years one through four of $500,000, and a maximum payment in year five of $2.0 million plus any shortfalls from years one through four. The estimated 47 fair value of the earnout payments included in the consideration for purchase was $690,000. The operating activity from acquisition date to March 31, 2015 was immaterial. The operating revenues of MotorFist, LLC for the two years prior to acquisition are not considered material to these consolidated financial statements. The Company has completed its evaluation of the purchase price and the allocation of the acquisition costs is as follows: Total consideration for purchase .................. $ 9,118,000 Accounts receivable ............................. 1,137,000 Inventories ..................................... 1,579,000 Other ......................................... 636,000 Intangible assets ................................ 2,580,000 Total assets acquired ........................ 5,932,000 Total liabilities assumed ..................... 156,000 Net assets acquired .............................. 5,776,000 Goodwill acquired .............................. $ 3,342,000