Answered: On June 30, 2021, Streeter Company…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 52E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...

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On June 30, 2021, Streeter Company reported the following account balances:


Receivables	$	51,050	Current liabilities	$	(11,800	)
Inventory		85,750	Long-term liabilities		(52,000	)
Buildings (net)		83,400	Common stock		(90,000	)
Equipment (net)		33,600	Retained earnings		(100,000	)
Total assets	$	253,800	Total liabilities and equities	$	(253,800	)

On June 30, 2021, Princeton Company paid $325,900 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $15,200 in legal fees. Princeton also agreed to pay $58,600 to the former owners of Streeter contingent on meeting certain revenue goals during 2022. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $17,700.

In determining its offer, Princeton noted the following pertaining to Streeter:

It holds a building with a fair value $43,400 more than its book value.
It has developed a customer list appraised at $30,500, although it is not recorded in its financial records.
It has research and development activity in process with an appraised fair value of $37,100. However, the project has not yet reached technological feasibility and the assets used in the activity have no alternative future use.
Book values for the receivables, inventory, equipment, and liabilities approximate fair values.

Prepare Princeton’s accounting entries to record the combination with Streeter

1- Record the acquisition of Streeter Company.
2- Record the legal fees related to the combination.

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