Question

Winnie Corporation purchases Joshua Company and, as part of the contract, will have to pay Joshua...

Winnie Corporation purchases Joshua Company and, as part of the contract, will have to pay Joshua an additional $100,000 if the company achieves certain revenue goals for two years after the acquisition. How should Winnie account for this contingent payment?

Homework Answers

Answer #1

Winnie corporation need to make a provision for contingent liability of $200,000 that might pay in future. $100,000 in current year and $100,000 in next year. However if company is sure or finds that they will not achieve the certain level then they can skip to account provision or contingent liability.

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