Question 10
1 pts
An acquired company has an unsettled lawsuit, in which it is the defendant. The expected present value of the obligation is $5,000,000, and the lawsuit meets the requirements for recognition at acquisition date. No changes in the reported value are made until the lawsuit is settled, 18 months after acquisition, for $3,000,000.
In the year of settlement, the effect of the settlement is to report the $2,000,000 change in the value of the lawsuit as:
An increase in goodwill
Again
A decrease in goodwill
A loss