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Question 51 (3 points) H, Inc. acquires 100% of the voting stock of R Company on 1/1/Y1 for $400,000 cash. A contingent payment of $16,500
Question 51 (3 points) H, Inc. acquires 100% of the voting stock of R Company on 1/1/Y1 for $400,000 cash. A contingent payment of $16,500 will be paid on 4/15/Y2 if R generates cash flows from operations of $27,000 or more in the next year. H estimates that there is a 20% probability that R will generate at least $27.000 next year, and uses an interest rate of 5% to incorporate the time value of money. The fair value of $16,500 at 5%, using a probability weighted approach, is $3,142. Assuming R generates cash flow from operations of $27,200 in Y1, how will H record the $16,500 payment of cash on 4/15/Y2 in satisfaction of its contingent obligation? No entry O Debit Contingent performance obligation $16.500, and Credit Cash $16,500 U Debit Contingent performance obligation $3,142, debit Loss from revaluation of contingent performance obligation $13,358, and Credit Cash $16,500 Debit Goodwill and Credit Cash $16,500 Debit Investment in Subsidiary and Credit Cash $16,500
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