Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and goodwill of $88,000. At the acquisition date, Camille also agrees to pay Jordan’s previous owners an additional $110,000 on January 1, 2021, if Jordan earns a 10 percent return on the fair value of its assets in 2019 and 2020. Jordan’s profits exceed this threshold in both years. Which of the following is true? The $110,000 is recorded as a revaluation gain in 2021. The additional $110,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings. Consolidated goodwill as of January 1, 2021, increases by $110,000. The fair value of the expected contingent payment increases goodwill at the acquisition date.
Camille, Inc., bought all outstanding shares of Jordan Corporation on January 1, 2019, for $700,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $35,000 to equipment and
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The $110,000 is recorded as a revaluation gain in 2021.
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The additional $110,000 payment is reported as an adjustment to the beginning balance of consolidated
retained earnings . -
Consolidated goodwill as of January 1, 2021, increases by $110,000.
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The fair value of the expected contingent payment increases goodwill at the acquisition date.
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