Prey Company purchases a controlling interest in Shark Company by issuing $3,000,000 worth of new Common...

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Prey Company purchases a controlling interest in Shark Company by issuing $3,000,000 worth of new Common Shares. On that date, Prey's shares had a market value of $100 per share. A contingent agreement was drawn up whereby Prey would also pay 72% of any earnings in excess of $600,000 to Shark's shareholders in the year following the acquisition. Required: Assuming that Shark's net income the next year was $570,000. Prepare Prey's journal entry that you feel is necessary to reflect these results. (1 mark) Prey Company purchases a controlling interest in Shark Company by issuing $3,000,000 worth of new Common Shares. On that date, Prey's shares had a market value of $100 per share. A contingent agreement was drawn up whereby Prey would also pay 72% of any earnings in excess of $600,000 to Shark's shareholders in the year following the acquisition. Required: Assuming that Shark's net income the next year was $570,000. Prepare Prey's journal entry that you feel is necessary to reflect these results. (1 mark)

Answer rating: 100% (QA)

To reflect the contingent agreement with Sharks shareholders Prey Company would need ... View the full answer