H Company acquires 100% of the voting stock of R Company on January 1, 2021 for P400,000 cash. A contingent payment of P16,500 will be paid on April 15, 2022 if Ron Company generates cash flows from operations of P27,000 or more next year. H Company estimates that there is a 20% probability that R Company will generate at least P27,000 next year and uses an interest rate of 5% to incorporate the time value of money. The fair value of P16,500 at 5%, using a probability weighted approach is P3,142. What will H Company record as the acquisition price on January 1, 2021?
H Company acquires 100% of the voting stock of R Company on January 1, 2021 for P400,000 cash. A contingent payment of P16,500 will be paid on April 15, 2022 if Ron Company generates cash flows from operations of P27,000 or more next year. H Company estimates that there is a 20% probability that R Company will generate at least P27,000 next year and uses an interest rate of 5% to incorporate the time value of money. The fair value of P16,500 at 5%, using a probability weighted approach is P3,142. What will H Company record as the acquisition price on January 1, 2021?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 23E
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H Company acquires 100% of the voting stock of R Company on January 1, 2021 for P400,000 cash. A contingent payment of P16,500 will be paid on April 15, 2022 if Ron Company generates cash flows from operations of P27,000 or more next year. H Company estimates that there is a 20% probability that R Company will generate at least P27,000 next year and uses an interest rate of 5% to incorporate the time value of money. The fair value of P16,500 at 5%, using a probability weighted approach is P3,142. What will H Company record as the acquisition price on January 1, 2021?
*in good accounting form pls thanks
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