On June 22, 2018, Kroger, Inc., acquired the assets and liabilities of Home Chef, a privately owned company based in Chicago, Illinois, in exchange for $197 million in cash (net of 30 million cash acquired) and contingent consideration. Referring to Kroger’s 2018 financial statements, answer the following questions regarding the Home Chef acquisition.

1. Why did Kroger acquire Home Chef?

2. Provide a schedule showing Kroger’s allocations of the consideration transferred to Home Chef’s identifiable assets acquired and liabilities assumed with the remainder going to goodwill.

3. What is the maximum potential contingent payout (i.e., earnout) to the former owners of Home Chef? What were the factors that entered into the determination of the acquisition-date fair value of the contingent consideration?