qMLM Inc. acquired net assets of Lizzi Corporation on January 1,2014, for P700,000 in cash. This portion of the consideration transferred results in a fair value allocation of P35,000 to equipment and goodwill of P88,000.At the acquisition date, MLM also agrees to pay Lizzi previous owners an additional P110,000 on January 1,2016,if Lizzi earns a 10% return on the fair value of its assets in 2014 and 2015. Lizzi's profits exceed this threshold in both years. Which of the following is true? * The additional P110,000 payment is a reduction in retained earnings. The fair value of the expected contingent payment increases goodwill at the acquisition date. Goodwill as of January 1,2016, increases by P110,000 The P110,000 is recorded as an expense in 2016.

qMLM Inc. acquired net assets of Lizzi Corporation on January 1,2014, for P700,000 in cash. This portion of the consideration transferred results in a fair value allocation of P35,000 to equipment and goodwill of P88,000.At the acquisition date, MLM also agrees to pay Lizzi previous owners an additional P110,000 on January 1,2016,if Lizzi earns a 10% return on the fair value of its assets in 2014 and 2015. Lizzi's profits exceed this threshold in both years. Which of the following is true? * The additional P110,000 payment is a reduction in retained earnings. The fair value of the expected contingent payment increases goodwill at the acquisition date. Goodwill as of January 1,2016, increases by P110,000 The P110,000 is recorded as an expense in 2016.

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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