Reference no: EM132864614

Kuh Lafuh Company purchased a customer list and an ongoing research project for a total of P400,000. Kuh uses the expected cash flow approach for estimating the fair value of these two intangibles. The appropriate interest rate is 7%. The potential future cash flows from the two intangibles, and their associated probabilities, are as follows:

Customer List

Outcome 1 - 20% probability of cash flows of P50,000 at the end of each year for 5 years.

Outcome 2 - 30% probability of cash flows of P30,000 at the end of each year for 4 years.

Outcome 3 - 50% probability of cash flows of P10,000 at the end of each year for 3 years.

Ongoing Research Project

Outcome 1 - 10% probability of cash flows of P500,000 at the end of each year for 10 years.

Outcome 2 - 10% probability of cash flows of P10,000 at the end of each year for 4 years.

Outcome 3 - 80% probability of cash flows of P100 at the end of each year for 3 years.

Problem 1: How much should be recognized as customer list?

a. P400,000

b. P 77,025

c. P 84,609

d. P322,975