1.

The terms of a business combination may require an additional cash payment, or an additional
share issue dependent on some specified future event. This is known a contingent consideration

2. Betty Developers Corp. purchased the common shares of Barb Materials Inc. for $550,000.
However, the fair value of Barb Materials' net assets was $600,000. Which of the following is
the journal entry to record the purchase of shares of Barb Materials?

Dr: Investment in Bard 600000

Cr: cash 550000
Cr Gain 50000
 Debit Investment in Barb Materials Inc. for $600,000; Credit Cash for $550,000 and Gain on
Bargain Purchase for $50,000.
3. Topaz Corp. purchased all of Zircon Corp.'s common shares on January 1, 20X1. On the
acquisition date, the book value of Zircon's assets is comprised of inventory of $45,000, land of
$120,000, and equipment of $75,000. On the acquisition date, the fair values are: inventory
$55,000, land $150,000, and equipment $80,000. Calculate the fair value increment of Zircon's
assets.
Reason: 
Fair value increment = ($55,000 – $45,000) + ($150,000 – $120,000) + ($80,000 – $75,000)
= $10,000 + $30,000 + $5,000 = $45,000.