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P2.8 Bargain Purchase and Preacquisition Contingency On January 2, 2020, Fisher Corporation acquired all of the voting common stock of Grant Corporation for its own stock worth $10,000,000, in a merger. Grant's condensed balance sheet on January 2, 2020, appears below: Assets Book Value Fair Value Cash and receivables..... Inventory............. Plant assets ....... Other assets...... $ 6,400,000 3,800,000 4,000,000 3,000,000 $17,200,000 $6,400,000 5,800,000 6,500,000 3,000,000 Total assets ... Liabilities and Shareholders' Equity Book Value Fair Value $5,000,000 1,800,000 Current liabilities. ........ Long-term debt Capital stock ... Retained earnings ....... Total liabilities and equity........ $ 5,000,000 1,800,000 2,000,000 8,400,000 $17,200,000 Note: On December 31, 2019, a lawsuit alleging defective products and claiming damages of $1,000,000 was filed against Grant. The estimated liability and related loss, believed to be $800,000, have not yet been accrued. The lawsuit meets the criteria for recognition as a contingent liability. Required a. Prepare the journal entry made by Fisher to record the acquisition of Grant. There are no unrecorded identifiable intangibles. b. During 2020, new facts are discovered that reset the value of the lawsuit at the date of acquisition to $300,000. Prepare the journal entry to record the change in the value of the lawsuit. c. Assume that at the end of 2021, based on events occurring after the acquisition date, the lawsuit was settled out of court for $400,000 in cash. Prepare the journal entry to record this event. $300 P2.8 Bargain Purchase and Preacquisition Contingency On January 2, 2020, Fisher Corporation acquired all of the voting common stock of Grant Corporation for its own stock worth $10,000,000, in a merger. Grant's condensed balance sheet on January 2, 2020, appears below: Assets Book Value Fair Value Cash and receivables..... Inventory............. Plant assets ....... Other assets...... $ 6,400,000 3,800,000 4,000,000 3,000,000 $17,200,000 $6,400,000 5,800,000 6,500,000 3,000,000 Total assets ... Liabilities and Shareholders' Equity Book Value Fair Value $5,000,000 1,800,000 Current liabilities. ........ Long-term debt Capital stock ... Retained earnings ....... Total liabilities and equity........ $ 5,000,000 1,800,000 2,000,000 8,400,000 $17,200,000 Note: On December 31, 2019, a lawsuit alleging defective products and claiming damages of $1,000,000 was filed against Grant. The estimated liability and related loss, believed to be $800,000, have not yet been accrued. The lawsuit meets the criteria for recognition as a contingent liability. Required a. Prepare the journal entry made by Fisher to record the acquisition of Grant. There are no unrecorded identifiable intangibles. b. During 2020, new facts are discovered that reset the value of the lawsuit at the date of acquisition to $300,000. Prepare the journal entry to record the change in the value of the lawsuit. c. Assume that at the end of 2021, based on events occurring after the acquisition date, the lawsuit was settled out of court for $400,000 in cash. Prepare the journal entry to record this event. $300

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