Assume the same information as in Exercise 2-5 except that instead of paying a cash earnout, Pritano Company agreed to issue 10,000 additional shares of its $10 par value common stock to the stockholders of Succo if the average postcombination earnings over the next three years equaled or exceeded $2,500,000. The fair value of the contingent consideration on the date of acquisition was estimated to be $200,000. The contingent consideration (earnout) was classified as equity rather than as a liability.

Required:

A. Prepare the journal entries on the books of Pritano to record the acquisition on December 31, 2018.

B. On January 1, 2022, the additional 10,000 shares of Pritano’s stock were issued because the earnout targets were met. On this date, Pritano’s stock price was $50 per share. Prepare the journal entry to record the issuance of the shares of stock.