Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1, 2016, for $706,000 in cash. This portion of the consideration transferred results in
Dosmann, Inc., bought all outstanding shares of Lizzi Corporation on January 1, 2016, for $706,000 in cash. This portion of the consideration transferred results in a fair-value allocation of $57,000 to equipment and goodwill of $111,900. At the acquisition date, Dosmann also agrees to pay Lizzi's previous owners an additional $167,000 on January 1, 2018, if Lizzi earns a 10 percent return on the fair value of its assets in 2016 and 2017. Lizzi's profits exceed this threshold in both years. Which of the following is true? Multiple Choice Consolidated goodwill as of January 1, 2018, increases by $167,000. The $167,000 is recorded as an expense in 2018. The fair value of the expected contingent payment increases goodwill at the acquisition date. The additional $167,000 payment is a reduction in consolidated retained earnings
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started