Edina Company, paying $$2,600,$sets $($except cash$)$ and assumed the liabilities of Burns Company on January $1,2013,$ pas fol $82,600,000$ cash. Immediately prior to the acquisition, Burns Company' balance sheet was as follows:

BOOK VALUE

Accounts receivable $($net$)$

Inventory

$$240,000$

FAIR VALUE $ $220,000$

Land

$290,000$

$320,000$

Buildings $($net$)$

$960,000$

$1,508,000$

Total

$1,020,000$

$1,392,000$

$$2,510,000$

$$3,440,000$

Accounts payable

$$270,000$

Note payable

$$270,000$

Common stock, $$5$ par

$420,000$

Other contributed capital

$640,000$

Retained earnings

$580,000$

Total

$$2,510,000$

Edina Company agreed to pay Burns Company's former stockholders $$200,000$ cash in $2014$ if post$-$ combination earnings of the combined company reached $$1,000,000$ during $2013.$

Required:

A$.$ Prepare the journal entry necessary for Edina Company to record the acquisition on January $1,2013.$ It is expected that the earnings target is likely to be met.

B$.$ Prepare the journal entry necessary for Edina Company in $2014$ assuming the earnings contingency was not met.

Answer rating: 100% (QA)

Edina Company Acquisition Journal Entries A Acquisition Entry January 1 2013 This entry records the ... View the full answer