When a Contingent Consideration Arising from a Business Combination Is

question 20

Multiple Choice

When a contingent consideration arising from a business combination is classified as equity, how is any change in its fair value accounted for if the difference arises due to a change in circumstances?

• A) As an adjustment to the consideration paid for the subsidiary.
• B) As an adjustment to an estimate included in the determination of net income.
• C) As a memorandum entry indicating that additional shares had been issued.
• D) As an adjustment to consolidated contributed surplus.

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Definitions:

Contract

A legally enforceable agreement between two or more parties with mutual obligations.

Paving Streets

The process of covering and constructing roads with materials like asphalt or concrete to create a smooth, durable surface for vehicles and pedestrians.

Property Value

The monetary worth that is assigned to a property, based on factors such as market conditions, location, and the state of the property.

Creditor Beneficiary

A third party that benefits from a contract made between two other parties, wherein the promisee's intention is to provide a benefit to the creditor beneficiary.