As part of the acquisition agreement, Parma Corporation agrees to pay the former shareholders of...
90.2K
Verified Solution
Link Copied!
Question
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?
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
