When the Future Income of the Acquiree Is Regarded as Uncertain

question 39

Multiple Choice

When the future income of the acquiree is regarded as uncertain, the agreement may contain a clause that requires the acquirer to provide additional consideration to the acquiree if the income of the acquiree exceeds a specified amount over some specified period. For example, A may agree to pay $100,000 to acquire B and promise to pay an additional $50,000 in two years if B earns at least $100,000 for the next two years. A is concerned that the owners of B are integral to the success of B and may not stay involved if they receive full payment immediately. This is an example of:

• A)goodwill.
• B)contingent consideration.
• C)monetary assets.
• D)intangible assets.

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Definitions:

Keyword Method

A mnemonic device that involves using keywords and mental imagery to associate verbal material.

Acrostic

A composition such as a poem or word puzzle where specific letters from each line create a separate word or phrase.

Party

A social gathering of invited guests, typically involving eating, drinking, and entertainment.

Levels of Processing

Refers to a framework in cognitive psychology suggesting that the depth of mental processing affects memory retention, with deeper processing leading to better recall.