On June 30, 2021, Streeter Company reported the following account balances: Receivables $ 50,700 Current liabilities...
On June 30, 2021, Streeter Company reported the following account balances:
| Receivables | $ | 50,700 | Current liabilities | $ | (15,800 | ) |
| Inventory | 87,750 | Long-term liabilities | (51,250 | ) | ||
| Buildings (net) | 84,100 | Common stock | (90,000 | ) | ||
| Equipment (net) | 34,500 | Retained earnings | (100,000 | ) | ||
| Total assets | $ | 257,050 | Total liabilities and equities | $ | (257,050 | ) |
On June 30, 2021, Princeton Company paid $309,000 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $14,200 in legal fees. Princeton also agreed to pay $54,500 to the former owners of Streeter contingent on meeting certain revenue goals during 2022. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $19,300.
In determining its offer, Princeton noted the following pertaining to Streeter:
- It holds a building with a fair value $41,200 more than its book value.
- It has developed a customer list appraised at $24,500, although it is not recorded in its financial records.
- It has research and development activity in process with an appraised fair value of $36,000. However, the project has not yet reached technological feasibility and the assets used in the activity have no alternative future use.
- Book values for the receivables, inventory, equipment, and liabilities approximate fair values.
Prepare Princeton’s accounting entries to record the combination with Streeter.
Homework Answers
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On June 30, 2021, Streeter Company reported the following
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