What are the accounting ramifications of each of the three following situations involving the payment of contingent consideration in an acquisition? a. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to pay $100,000 cash two years later if S income exceeds an income target. The target is exceeded. b. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to issue 10,000 additional shares of its stock two years later if S income exceeds an income target. The target is exceeded. c. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to issue 5,000 additional shares two years later if the fair value of P shares falls below $50 per share. Two years later, the stock has a fair value below $50, and added shares are issued to S.
What are the accounting ramifications of each of the three following situations involving the payment of contingent consideration in an acquisition?
a. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to pay $100,000 cash two years later if S income exceeds an income target. The target is exceeded.
b. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to issue 10,000 additional shares of its stock two years later if S income exceeds an income target. The target is exceeded.
c. P Company issues 100,000 shares of its $50 fair value ($1 par) common stock as payment to buy S Company on January 1, 2015. P agrees to issue 5,000 additional shares two years later if the fair value of P shares falls below $50 per share. Two years later, the stock has a fair value below $50, and added shares are issued to S.
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