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As part of the acquisition agreement, Parma Corporation agrees to pay the former shareholders of...

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Accounting

As part of the acquisition agreement, Parma Corporation agrees to pay the former shareholders of Stow Company $0.50 in cash for every dollar of gross revenues above $5,500,000 reported at the end of the first year following acquisition. Parma projects the following gross revenues outcomes for the year: Gross revenues Probability $3,500,000 0.05 4,500,000 0.30 5,500,000 0.20 6,500,000 0.25 7,500,000 0.20 Using a 6 percent discount rate, what is the appropriate value to be reported as an earnings contingency liability on Parma's books at the date of acquisition?

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