Should navinow account for the contingent payments

Assignment Help Accounting Basics
Reference no: EM13522268

Navi Now Company agrees to pay $20 million in cash to the four former owners of Traffic Eye for all of its assets and liabilities. These four owners of Traffic Eye developed and patented a technology for real time monitoring of traffic patterns on the nation's top 200 frequently congested highways. Navi Now plans to combine the new technology with its existing global positioning systems and projects a resulting substantial revenue increase.

As part of the acquisition contract, Navi Now also agrees to pay additional amounts to the former owners upon achievement of certain financial goals. Navi Now will pay $8 million to the four former owners of Traffic Eye if revenues from the combined system exceed $100 million over the next three years. Navi-

Now estimates this contingent payment to have a probability adjusted present value of $4 million.

The four former owners have also been offered employment contracts with Navi Now to help with system integration and performance enhancement issues. The employment contracts are silent as to service periods, have nominal salaries similar to those of equivalent employees, and specify a profit sharing component over the next three years (if the employees remain with the company) that Navi Now estimates to have a current fair value of $2 million. The four former owners of Traffic Eye say they will stay on as employees of Navi Now for at least three years to help achieve the desired financial goals.

Should NaviNow account for the contingent payments promised to the former owners of Traffic Eye as consideration transferred in the acquisition or as compensation expense to employees?

Reference no: EM13522268

Previous Q& A

  Explain solution a is twice as concentrated as solution b

Solution A is twice as concentrated as solution B but has a smaller absorbance value. Both solutions abosrb maximally at wavelength =585 nm. Give a through explanation for this observation.

  Find the work generated by this engine during one cycle

A Carnot engine has 40 g of helium gas as its working substance. It operates between two reservoirs of temperatures T1 = 400°C and T2 = 60°C. find the work generated by this engine during one cycle

  Outstanding common stock of renn corp

Renn's inprocess research and development was estimated to have a fair value of $200,000.

  Explain what is the length of a side of the unit cell

Assume that the aluminum atoms can be represented as spheres, as shown in the drawing (Part C figure) . If each atom has a radius of 1.43 , what is the length of a side of the unit cell

  Define the standard free energy change dgo

The temperature is 2200 oC inside the lightning bolt, the bolt lasts long enough for all three species to reach equilibrium at that temperature, and the pressure of NO is 0.001 atm at equilibrium. Calculate the standard free energy change ΔGo for ..

  Prepare the journal entry for organic growth at january

Prepare the journal entry for Organic Growth at January 2, 2012, assuming Organic Growth estimates returns of 20% based on prior experience.

  Draw the reaction product

Draw the reaction product(s) formed by the bromination of (z)-stilbene, designate all product sterocenters accurately and label all sterocenters in the final product(s)

  Explain the dissolved carbon dioxide

In the opening statement of this lab it is said that "Carbon dioxide, CO2, is the most important acid-producing compound in our atmosphere; rainwater is therefore naturally slightly acidic because of the dissolved carbon dioxide".

  Identify alternative revenue recognition criteria

Identify alternative revenue recognition criteria that Uddin could employ concerning textbook sales - briefly discuss the reasoning

  Explain a solution gave a precipitate when ammonium oxalate

A solution gave a precipitate when ammonium oxalate was added but gave no precipitate when ammonium sulfate was added. For each Magnesium group ion(Barium, Magnesium, Strontium, and Calcium) tell whether the ion

Reviews

Write a Review

 

Similar Q& A

  Should junior company buy part externally make it internally

Junior Company currently buys 30,000 units of a part used to manufacture its product at $40 per unit. Recently the supplier informed Junior Company that a 20 percent increase will take effect next year.

  Respond to the following ethical issue concerning the

respond to the following ethical issue concerning the reclassification of receivables in your initial postmoss exports

  Bonds making semiannual payments

Watters umbrella corp issued 12 year bonds 2 years ago at a coupon rate of 7.8%. The bonds make semiannual payments. If these bonds currently sell for 105% of par value, what is the YTM?

  The warranty reserve directly to retained earnings

What basic accounting principle is violated by the recording of the warranty reserve directly to retained earnings?

  Determine the role of the end-user in the database

what is the role of the end-user in the database development process? why is the relational approach to creating

  Income statement for particular year

On December 1, 2002, Blake Inc. signed an operating lease for a warehouse for 10 years at $24,000 per year. Upon execution of the lease, Blake paid $48,000 covering rent for the first two years. How much should be shown in Blake's income statement..

  Characteristics of a sole proprietorship

What are three characteristics of a sole proprietorship - Are these characteristics the same as or different from those of a partnership?

  Determine the service cost component of the net pension cost

Carlson Company sponsors a single-employer defined benefit pension plan. The plan provides that pension benefits are determined by age, years of service, and compensation.

  Search the internet eg a companys website or secgov and

search the internet e.g. a companys website or sec.gov and find an audit report for a companys

  What is one assurance engagement and one attestation

the american institute of certified public accountants aicpa and the institute of internal auditors iia have positioned

  Problem related to purchase of land

Jonas Lumber Company owns a 7,000-acre tract of timber purchased in 2003 at a cost of $1,300 per acre. At the time of purchase the land was estimated to have a value of $300 per acre without the timber.

  At the close of its first year of operations december 31

at the close of its first year of operations december 31 2014 madeline company had accounts receivable of 1100000 after

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd