Branson paid $607,500 cash for all of the outstanding common stock of Wolfpack, Inc., on January 1, 2020.On that date, the subsidiary had a book value of $373,000 (common stock of $200,000 and retainedearnings of $173, 000), although various unrecorded royalty agreements (10-year remaining life) wereassessed at a $199, 000 fair value. Any remaining excess fair value was considered goodwill. In negotiatingthe acquisition price, Branson also promised to pay Wolfpack's former owners an additional $45,000 ifWolfpack's income exceeded $150,000 total over the first two years after the acquisition. At the acquisitiondate, Branson estimated the probability - adjusted present value of this contingent consideration at $31,500. On December 31, 2020, based on Wolfpack's earnings to date, Branson increased the value of thecontingency to $36,000. During the subsequent two years, Wolfpack reported the following amounts forincome and dividends: Net Income Dividends Declared 2020 $ 80,500 $ 25,000 2021 90, 500 35,000 Inkeeping with the original acquisition agreement, on December 31, 2021, Branson paid the additional $45,000 performance fee to Wolfpack's previous owners. Prepare each of the following: Branson's entry torecord the acquisition of the shares of its Wolfpack subsidiary. Branson's entries at the end of 2020 and 2021to adjust its contingent performance obligation for changes in fair value and the December 31, 2021,payment. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson hasapplied the equity method. Prepare consolidation worksheet entries as of December 31, 2021, assumingthat Branson has applied the initial value method.

ParticularsDebitCreditInvestment on Wolfpack $639,000Contingent performance…

45,000 performance fee to Wolfpack's previous owners. Prepare each of the following: Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary. Branson's entries at the end of 2020 and 2021 to adjust its contingent performance obligation for changes in fair value and the December 31, 2021, payment. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the equity method. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the initial value method.

45,000 performance fee to Wolfpack's previous owners. Prepare each of the following: Branson's entry to record the acquisition of the shares of its Wolfpack subsidiary. Branson's entries at the end of 2020 and 2021 to adjust its contingent performance obligation for changes in fair value and the December 31, 2021, payment. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the equity method. Prepare consolidation worksheet entries as of December 31, 2021, assuming that Branson has applied the initial value method.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

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