Changes in Acquisition Values

On October 1, 2019, Asure Corporation acquires the net assets of BlueBox Inc. in a business combination. Asure's acquisition entry looks like this (amounts in thousands):

General Journal
Description	Debit	Credit
Current assets	18,000
Plant and equipment	60,000
Identiable intangibles	40,000
Goodwill	350,000
Notes payable		150,000
Cash		350,000
Earnings contingency liability		48,000

Brand names and customer lists with a 4-year life comprise the identifiable intangibles. Assume any asset write-offs are current as of the date the new information is discovered.

Required For each of the following independent situations Asure's journal entry, if any, to record the information.

Instructions:Enter all amounts are in thousands.

a. On February 1, 2020, Asure receives information that the appraiser of BlueBox's plant and equipment was not qualified. A new appraiser values BlueBox's plant and equipment at $42,000 as of the date of acquisition. The plant and equipment has a 5-year life.

General Journal
Description	Debit	Credit
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer
Plant & equipment	Answer	Answer
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer

b. On March 15, 2020, Asure learns that inventory mistakenly valued at $1,500 at the date of acquisition was really worth $300 at that time. The inventory has been sold.

General Journal
Description	Debit	Credit
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer

c. On June 30, 2020, BlueBox's equipment, acquired by Asure, was damaged in a fire. The amount of damage is $9,000. The equipment has a 5-year life.

General Journal
Description	Debit	Credit
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer

d. On September 22, 2020, Asure determines that because of an increase in demand for BlueBox's products since the date of acquisition, the brand names recorded at the date of acquisition have increased in value by $6,000. In addition, the earnout agreement's fair value has declined by $3,000.

General Journal
Description	Debit	Credit
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer
AnswerCost of goods soldDepreciation expenseEarnout liabilityGain on earnout (income)Gain on equipment (income)GoodwillInventoryLoss on earnout (income)Loss on equipment (income)Plant & equipmentNo entry	Answer	Answer

Answer rating: 100% (QA)

Here are the journal entries for each situation a Plant equip... View the full answer