P-Company acquired the net assets (excluding cash) of Butter Company on January 1, 2012 for $1,200,000. P-Company also agreed to pay Butter Company ownership (current shareholders) an additional $200,000 if P-Company is able to increase its sales by more than 10% annually in 2013 and 2014. P-Company expects to increase sales by 15% annually.

Question:

a) Revise the P-Company Balance Sheet Post Acquisition

Butter Company
Balance Sheet (just before acquisition)
December 31, 2011
Assets				Fair Value
Cash	275,000			75,000
A/R	200,000			100,000
Inventory	150,000			75,000
Other Assets	50,000			100,000
Equipment	350,000			350,000
Building	300,000			600,000
Land	600,000			1,500,000
Total Assets	1,925,000			2,800,000
Liabilities
A/P	300,000			300,000
Mortgage Payable	400,000			400,000
LT Debt	1,000,000			1,000,000
Total Liabilities	1,700,000			1,700,000
Equity
Common Stock (Par $1)	50,000
APIC	1,100,000
RE	(925,000)
Total Equity	225,000
Total Liabilities and Equity	1,925,000

P-Company
Balance Sheet (just before acquisition)
December 31,2011
Assets
Cash	1,500,000
A/R	1,300,000
Inventory	800,000
Other Assets	450,000
Equipment	2,500,000
Building	850,000
Land	1,000,000
Liabilities
A/P	250,000
Mortgage Payable	300,000
L.T Debt	1,600,000
Total Liabilities	2,150,0000
Equity
Common Stock (Par $1)	500,000
APIC	5,000,000
RE	750,000
Total Equity	6,250,000
Total Liabilities and Equity	8,400,000