On January 1, 20X3 the Fair Values of Pink Coral's

question 26

Essay

On January 1, 20X3 the fair values of Pink Coral's net assets were as follows:
On January 1, 20X3, 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, 20X5, if the average income during the 2-year period of 20X3-20X4 exceeded $80,000 per year. The expected value of this consideration was calculated as $184,000; the measurement period is one year. Blue Reef paid $15,000 in professional fees to negotiate the purchase and construct the acquisition agreement and $10,000 in stock issuance costs.
Required: Prepare Blue Reef's entries:
a) on January 1, 20X3 to record the acquisition
b) on August 1, 20X3 to revise the contingent consideration to $170,000
c) on January 1, 20X5 to settle the contingent consideration clause of the agreement for $175,000

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Definitions:

Chronic Worry

Persistent and excessive anxiety about future events or potential outcomes, often leading to stress and affecting daily functioning.

Fight-or-Flight

The physiological response to perceived harmful events, attacks, or threats to survival.

General Adaptation Syndrome

A model describing the body's short-term and long-term reactions to stress, consisting of three stages: alarm, resistance, and exhaustion.

Hardy Personality

Describes individuals who exhibit resilience and a stronger ability to cope with stress.