On January 1, 20X1 the Fair Values of Pink Coral's

question 17

Essay

On January 1, 20X1 the fair values of Pink Coral's net assets were as follows:
$\begin{array}{lr}\text { Current Assets } & 100,000 \\\text { Equipment } & 150,000 \\\text { Land } & 50,000 \\\text { Buildings } & 300,000 \\\text { Liabilities } & 80,000\end{array}$ On January 1, 20X1, Blue Reef Company purchased the net assets of the Pink Coral Company by issuing 100,000 shares of its $1 par value stock when the fair value of the stock was $6.20. It was further agreed that Blue Reef would pay an additional amount on January 1, 20X3, if the average income during the 2-year period of 20X1-20X2 exceeded $80,000 per year. The expected value of this consideration was calculated as $184,000; the measurement period is one year.
Required: Prepare Blue Reef's entries:
a) on January 1, 20X1 to record the acquisition
b) on August 1, 20X1 to revise the contingent consideration to $170,000
c) on January 1, 20X3 to settle the contingent consideration clause of the agreement for $175,000

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Definitions:

Ethical Decision-Making

The process of evaluating and choosing among alternatives in a manner consistent with ethical principles.

Connectiveness

The state or quality of being connected or interconnected, often referring to social bonds or technological connections.

Relationships

Connections or associations between two or more entities, ranging from interpersonal to international levels.

Abstract Reasoning

The process of thinking about things in a conceptual or symbolic way, often involving the ability to understand complex concepts and perceive relationships without relying on concrete real-world examples.