On January 3, 2012, Prance Corporation purchased all of the business operations of Step Corporation for $1,800,000 cash. The acquisition is recorded as a statutory merger. Step's identifiable assets and liabilities are listed below at their fair values:
Current assets................................................................ $ 850,000
Noncurrent assets ............................................................. 1,600,000
Estimated liability: defective product lawsuits ............................ 280,000
Other liabilities ................................................................. 500,000
The $280,000 estimated liability represented Step's best estimate of likely losses due to lawsuits pending as of January 3, 2012. Later in 2012, as favorable information regarding the January 3, 2012, status of defective products became available, the estimated liability was reduced to $200,000. Then, in late 2013, after observing large judgments awarded by courts in similar lawsuits against competitors, management revised the estimated liability upward to $350,000.
Required
Prepare the entries made by Prance to record the above events.