On January 1, 2020 High acquires 100% of Low in a transaction structured as an acquisition, with Low surviving as a wholly owned subsidiary. The following are the terms of the transaction: High pays $2,000,000 cash to Low’s shareholders High issues 40,000 shares to Low’s shareholders with a par value of $2 a share and a fair value of $60 a share. High pays outside attorneys $100,000 to draft the purchase agreement High pays outside accountants $60,000 to prepare financial statements for the consolidated entity. High pays its own administrative staff $50,000 for their work on the acquisition High pays underwriters $80,000 to register the shares issued on an exchange. High agrees that if Low earns $900,000 during 2020, High will pay an additional $1,500,000. At acquisition date, probability of that occurring is given at 30% How much will High debit to its Investment in Low at January 1, 2020
On January 1, 2020 High acquires 100% of Low in a transaction structured as an acquisition, with Low surviving as a wholly owned subsidiary. The following are the terms of the transaction:
High pays $2,000,000 cash to Low’s shareholders
High issues 40,000 shares to Low’s shareholders with a par value of $2 a share and a fair value of $60 a share.
High pays outside attorneys $100,000 to draft the purchase agreement
High pays outside accountants $60,000 to prepare financial statements for the consolidated entity.
High pays its own administrative staff $50,000 for their work on the acquisition
High pays underwriters $80,000 to register the shares issued on an exchange.
High agrees that if Low earns $900,000 during 2020, High will pay an additional $1,500,000. At acquisition date, probability of that occurring is given at 30%
How much will High debit to its Investment in Low at January 1, 2020
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