Pritano company acquired all the net assets of succo company

Asset Purchase, Contingent Consideration

Pritano Company acquired all the net assets of Succo Company on December 31, 2010, for $2,160,000 cash. The balance sheet of Succo Company immediately prior to the acquisition showed:

 

Book value

Fair value

Current assets

$ 960,000

$ 960,000

Plant and equipment

1,080,000

1,440,000

Total

$2,040,000

$2,400,000

Liabilities

$ 180,000

$ 216,000

Common stock

480,000

 

Other contributed capital

600,000

 

Retained earnings

780,000

 

Total

$2,040,000

 

As part of the negotiations, Pritano agreed to pay the stockholders of Succo $360,000 cash if the postcombination earnings of Pritano averaged $2,160,000 or more per year over the next two years.

Required:

Prepare the journal entries on the books of Pritano to record the acquisition on December 31, 2010. It is expected that the earnings target is likely to be met.