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On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. 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 $800,000, 5-year life • Favorable leases, fair value $400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 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 ,2023, trial balance appears below.

On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. 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 $800,000, 5-year life • Favorable leases, fair value $400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 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 ,2023, trial balance appears below.

FINANCIAL ACCOUNTING
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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On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. 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 $800,000, 5-year life • Favorable leases, fair value $400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 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. Current assets Property and equipment, net Liabilities Capital stock Retained earnings, January 1 Sales revenue Cost of goods sold Operating expenses On the December 31, 2023, consolidated balance sheet, developed technology is reported at Select one: Dr (Cr) $8,000,000 20,000,000 (23,200,000) (800,000) (3,520,000) (28,000,000) 24,000,000 3,520,000 $0 a. $480,000 b. $800,000 c. $384,000 d. $640,000
Transcribed Image Text:On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. 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 $800,000, 5-year life • Favorable leases, fair value $400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 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. Current assets Property and equipment, net Liabilities Capital stock Retained earnings, January 1 Sales revenue Cost of goods sold Operating expenses On the December 31, 2023, consolidated balance sheet, developed technology is reported at Select one: Dr (Cr) $8,000,000 20,000,000 (23,200,000) (800,000) (3,520,000) (28,000,000) 24,000,000 3,520,000 $0 a. $480,000 b. $800,000 c. $384,000 d. $640,000
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