Powell company buys all of the outstanding common shares of south bay company on

Powell company buys all of the outstanding common shares of south bay company on january1 in the year of acquisition for $1,500,000 cash and uses the acquisition method. if a contingent cash payment is a portion of the negotiated fair value of this acquisition, how will changes in the revaluation of the contingent performance payment affect the future financial statements? changes from the revaluation are reported in the income statement as ordinary income.revaluations affect the acquisition price and are recorded in the investment in south bay account.changes from the revaluation are reported as prior period adjustments and affect retained earnings.revaluations in contingent performance payments are recorded in apic—contingent equity outstanding.revaluations do not effect the future financial statements.