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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?

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?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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