Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

SAMSAN TECH acquires 100% of the voting stock of MORNING Co on January 1, 2018 for 400,000 cash. A contingent payment of 16,500 will be

SAMSAN TECH acquires 100% of the voting stock of MORNING Co on January 1, 2018 for 400,000 cash. A contingent payment of 16,500 will be paid on April 1, 2019 if MORNING generates cash flows from operations of 27,000 or more in the next year. SAMSAN estimates that there is a 20% probability that MORNING will generate at least 27,000 or more in the 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.

Determine the amount SAMSAN will record as investment in subsidiary on January 1, 2017

a)400,000

b)416,500

c)427,000

d)403,142

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Stacey Whitecotton, Robert Libby, Fred Phillips

4th edition

1259964957, 1260413985, 1260565440, 978-1260413984

More Books

Students also viewed these Accounting questions