Which of the Following Is False Regarding Contingent Consideration in Business

question 92

Multiple Choice

Which of the following is false regarding contingent consideration in business combinations?

• A) Contingent consideration payable in cash is reported under liabilities.
• B) Contingent consideration payable in stock shares is reported under stockholders' equity.
• C) Contingent consideration is recorded because of its substantial probability of eventual payment.
• D) The contingent consideration fair value is recognized as part of the acquisition regardless of whether eventual payment is based on future performance of the target firm or future stock price of the acquirer.
• E) Contingent consideration is reflected in the acquirer's balance sheet at the present value of the potential expected future payment.

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Definitions:

Operating Leases

Leasing agreements for assets where the lessor retains ownership, and the lessee uses the asset for a specified period.

Financial Leases

Long-term leases that are non-cancellable and include terms to buy the asset at the end of the lease period.

Equity Options

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a stock at a specified price before a certain date.

CCA Tax Shield

A deduction that allows businesses to depreciate the cost of an asset over time for tax purposes, reducing their taxable income.