ADVANCED ACCOUNTING
13th Edition
ISBN: 9781260773033
Author: Hoyle
Publisher: MCG
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Chapter 3, Problem 9P
To determine
Identify the appropriate answer for the given statement from the given choices.
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Camille, Inc., bought all outstanding shares of
Jordan Corporation on January 1, 2019, for
$792,000 in cash. This portion of the
consideration transferred results in a fair-
value allocation of $41,700 to equipment and
goodwill of $108,300. At the acquisition date,
Camille also agrees to pay Jordan's previous
owners an additional $159,000 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 additional $159,000 payment is reported
as an adjustment to the beginning balance of
consolidated retained earnings.
Consolidated goodwill as of January 1, 2021,
increases by $159,000.
The $159,000 is recorded as a revaluation
gain in 2021.
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 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 $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, Camille also agrees to pay Jordan’s previous owners an additional $147,000 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?
Multiple Choice
Consolidated goodwill as of January 1, 2021, increases by $147,000.
The additional $147,000 payment is reported as an adjustment to the beginning balance of consolidated retained earnings.
The $147,000 is recorded as a revaluation gain in 2021.
The fair value of the expected contingent payment increases goodwill at the acquisition date.
Chapter 3 Solutions
ADVANCED ACCOUNTING
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