Question
Pecan acquires Southern in an acquisition reported as a merger. The acquisition results in $50 million in goodwill. The acquisition cost includes an earnings contingency,
Pecan acquires Southern in an acquisition reported as a merger. The acquisition results in $50 million in goodwill. The acquisition cost includes an earnings contingency, valued at $1 million at the date of acquisition.
Within the measurement period, additional information on Southerns expected future performance at the date of acquisition reveals that the earnout actually had a fair value of $200,000 at the date of acquisition.
The entry to record the new information includes a credit of $800,000 to:
a.Intangible assets
b.Goodwill
c.Gain on acquisition
d.Earnings contingency liability
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