A Business Combination Involves a Contingent Consideration

question 12

Multiple Choice

A business combination involves a contingent consideration. It is considered 70% probable that a payment of $500,000 will become payable three years after the acquisition date. Using a 7% discount rate, how much interest expense should be recorded on the liability for the first year after acquisition?

• A) $19,999
• B) $24,500
• C) $28,570
• D) $35,000

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