Reference no: EM132920954

On January 1, 2018 the fair values of Pink Coral's net assets were as follows:

Accounts Receivables. 100,000

Equipment, Net. 150,000

Land 50,000

Buildings, Net. 300,000

Accounts Payable. 80,000

• On January 1, 2018, Blue Reef Company purchased the net assets of the Pink Coral Company by issuing 100,000 shares of its £1 par value stock when the fair value of the stock was £6.20. It was further agreed that Blue Reef would pay an additional amount on January 1, 2020, if the average income during the 2-year period of 2018-2019 exceeded £80,000 per year. The expected value of this consideration was calculated as £164,000; the measurement period is one year.

Required:

Problem 1: Prepare Blue Reef's entries:

1. On January 1, 2018 to record the acquisition
2. On August 1, 2018 to revise the contingent consideration to £170,000