Using the Acquisition Method, How Will Beatty Record the Stock

question 9

Multiple Choice

Using the acquisition method, how will Beatty record the stock contingency?

• A) Credit Contingent Performance Obligation, $20,000.
• B) Debit Additional Paid-In Capital, $20,000.
• C) Credit Additional Paid-In Capital, $2,884.
• D) Debit Contingent Performance Obligation, $2,884.
• E) No entry.

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Definitions:

Continuing Operations

The segments or activities of a business expected to continue for the foreseeable future, excluding any discontinued operations.

Revenue Recognition

The accounting principle that determines the specific conditions under which revenue is recognized or accounted for.

Conservatism

An accounting principle that dictates to recognize expenses and liabilities as soon as possible, but revenues and assets only when they are assured of being received.

Gross Profit Method

A technique used to estimate the amount of inventory a business has by applying the gross margin ratio to the cost of goods sold.