REFERENCE: Ref.03_09 Harrison,Inc.acquires 100% of the Voting Stock of Rhine Company on Company

Multiple Choice

REFERENCE: Ref.03_09
Harrison,Inc.acquires 100% of the voting stock of Rhine Company on January 1,2009 for $400,000 cash.A contingent payment of $16,500 will be paid on April 15,2010 if Rhine generates cash flows from operations of $27,000 or more in the next year.Harrison estimates that there is a 20% probability that Rhine will generate at least $27,000 next year,and uses an interest rate of 5% to incorporate the time value of money.The fair value of $16,500 at 5%,using a probability weighted approach,is $3,142.
-Assuming Rhine generates cash flow from operations of $27,200 in 2009,how will Harrison record the $16,500 payment of cash on April 15,2010 according to SFAS 141(R) ?

A) Debit Contingent performance obligation $16,500,and Credit Cash $16,500.
B) Debit Contingent performance obligation $3,142,debit Loss from contingent performance obligation $13,358,and Credit Cash $16,500.
C) Debit Investment in Subsidiary and Credit Cash,$16,500.
D) Debit Goodwill and Credit Cash,$16,500.
E) No entry.