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.

Record the journal entry on P-Companys ledger.

Revise the P-Company Balance Sheet Post Acquisition

	P - Company
	Balance Sheet (just before the Asset 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
	Total Assets		$8,400,000
	Liabilities
	A/P		$250,000
	Mortgage Payable		$300,000
	L.T. Debt		$1,600,000
	Total Liabilities		$2,150,000
	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

Acct 510

Chapter 2 LAB

P - Company

Balance Sheet (just after the Asset Acquisition)

January 1, 2012

Assets

Cash

$1,500,000

$1,200,000

$300,000

A/R

$1,300,000

$100,000

$1,400,000

Inventory

$800,000

$75,000

$875,000

Other Assets

$450,000

$100,000

$550,000

Equipment

$2,500,000

$350,000

$2,850,000

Building

$850,000

$600,000

$1,450,000

Land

$1,000,000

$1,500,000

$2,500,000

Goodwill

$375,000

$375,000

$-

Total Assets

$8,400,000

$10,300,000

Liabilities

A/P

$250,000

$300,000

$550,000

Liab for Cont. Consider.

$200,000

$200,000

$-

Mortgage Payable

$300,000

$400,000

$700,000

L.T. Debt

$1,600,000

$1,000,000

$2,600,000

Total Liabilities

$2,150,000

$4,050,000

Equity

Common Stock (Par $1)

$500,000

$500,000

APIC

$5,000,000

$5,000,000

RE

$750,000

$750,000

Total Equity

$6,250,000

$6,250,000

Total Liabilities and Equity

Butter Company
Balance Sheet (just before the Asset Acquisition)
December 31, 2011
				Fair Value
Assets
Cash		$275,000		$75,000		Fair Value Gave Up		Cash	$1,200,000
A/R		$200,000		$100,000				Cont. Consider.	$200,000
Inventory		$150,000		$75,000					$1,400,000
Other Assets		$50,000		$100,000
Equipment		$350,000		$350,000
Building		$300,000		$600,000		Fair Value Received			$1,025,000
Land		$600,000		$1,500,000			Goodwill		$375,000
Total Assets		$1,925,000		$2,800,000
Liabilities
A/P		$300,000		$300,000
Mortgage Payable		$400,000		$400,000
L.T. 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
Record Entry on P-Company's Ledger on January 1, 2012.
A/R		$100,000
Inventory		$75,000
Other Assets		$100,000
Equipment		$350,000
Building		$600,000
Land		$1,500,000
Goodwill		$375,000
	Cash			$1,200,000
	A/P			$300,000
	Liab. Contingent Consideration			$200,000
	Mortgage Payable			$400,000
	L.T. Debt			$1,000,000
		$3,100,000		$3,100,000