Saved Help Save & Exit S Check my w Dosmann, Inc., bought all outstanding shares

Question

Saved Help Save & Exit S Check my w Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1,2016, for $880,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $36,600 to equipment and goodwill of $101.700. At the acquisition date, Dosmann also agrees to pay Lizzi's previous owners an additional $147000 on January 1, 2018, if Lizzi earns a 10 percent return on the fair value of its assets in 2016 and 2017. Lizzi's profits exceed this threshold in both years. Which of the following is true? Multiple Choice The fair value of the expected contingent payment increases goodwill at the acquisition date. The additional $147,000 payment is a reduction in consolidated retained earnings. Consolidated goodwill as of January 1, 2018, increases by $147000 The $147000 is recorded as an expense in 2018.

Explanation / Answer

Among the given statements-

The fair value of the expected contingent payment would increase goodwill at the acquisition date is TRUE

Because, under the acquisition method ,the contingent consideration obligations are considered as part of initial value assigned.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.