January 1, 2020 Para Inc. acquired all of the outstanding common stock of Sail, Co. for cash. The book values of Sail's assets | liabilities approximated current values except that the book value of its building was less than its fair value (i.e., lervalued), and the book value of a patent was greater than its fair value (i.e., overvalued). Assume that both assets have a aining useful life of 11 years. When preparing Para's 2020 consolidated income statement, which of the following ustments would be made? ) A) Depreciation expense would be decreased and amortization expense would be increased. ) B) Depreciation expense would be increased and amortization expense would be decreased. )C) Both depreciation expense and amortization expense would be increased. ) D) Both depreciation expense and amortization expense would be decreased.

January 1, 2020 Para Inc. acquired all of the outstanding common stock of Sail, Co. for cash. The book values of Sail's assets | liabilities approximated current values except that the book value of its building was less than its fair value (i.e., lervalued), and the book value of a patent was greater than its fair value (i.e., overvalued). Assume that both assets have a aining useful life of 11 years. When preparing Para's 2020 consolidated income statement, which of the following ustments would be made? ) A) Depreciation expense would be decreased and amortization expense would be increased. ) B) Depreciation expense would be increased and amortization expense would be decreased. )C) Both depreciation expense and amortization expense would be increased. ) D) Both depreciation expense and amortization expense would be decreased.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounting On January 1, 2022, Pronto Company acquired all of Speedy Inc.'s voting stock for $28,800,000. Speedy's net assets were reported at amounts approximating book value, but Pronto determined that Speedy had the following previously unreported intangible assets: Developed technology, fair value $2,400,000, 5-year life • Favorable leases, fair value $1,200,000, 4-year life ● Speedy's shareholders' equity on January 1, 2022, was $12,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $960,000 in 2022. There are no impairments of identifiable intangibles or goodwill in 2022 or 2023. Pronto uses the complete equity method to report its investment in Speedy on its own books. Speedy's December 31, 2023, trial balance appears below. Dr (Cr) $24,000,000 Current assets Property and equipment, net 60,000,000 Liabilities (69,600,000) Capital stock (2,400,000) Retained earnings, January 1 (10,560,000) Sales revenue (84,000,000) Cost of goods sold 72,000,000…
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